* Halts federal subsidies to private student lenders
* Billions of dollars in savings to go to needy students
* Measure tied to healthcare overhaul
By Thomas Ferraro
WASHINGTON, March 25 An overhaul of the college
student loan program, ending federal subsidies to private
lenders, won final congressional approval on Thursday, giving
President Barack Obama a second major legislative victory this
Coming in the wake of passage on Sunday of Obama's landmark
U.S. healthcare reform, the measure would end the 45-year-old
Federal Family Education Loan Program, which has supported
private student lending with federal subsidies.
The program will be replaced by an expansion of direct
federal lending to students, eliminating well-paid middlemen --
bankers and other private lenders who have also been shielded
by taxpayers from the risk of default.
The projected $61 billion in savings over 10 years would be
used to provide federal grants to needy students and help fund
other federal education programs, such as support for community
colleges and historically black schools.
Obama's fellow Democrats in the Senate and House of
Representatives got the measure through Congress by tucking it
into a package of changes to the healthcare overhaul.
Lawmakers in both chambers approved the package and sent it
to Obama to sign into law.
A CNN/Opinion Research Corporation said this week that a
telephone survey of 1,030 adult Americans found 64 percent of
respondents approved it, while 34 percent opposed it.
"There is still a big partisan gap, 82 percent of Democrats
support the change, compared to 52 percent of Republicans,"
said CNN polling director Keating Holland. "Nonetheless, a
majority of both parties have a positive view of the proposal.
We haven't seen that very often in recent polls."
While student groups and Democratic lawmakers have backed
the overhaul, student loan giant Sallie Mae SLM.N and other
private lenders have staunchly opposed it.
Critics say the action will reduce students' lending
options and eliminate the jobs of thousands of private lenders,
hurting efforts to remedy an ailing U.S. economy that has a 9.7
A number of lawmakers, most Republicans, also opposed the
measure, saying it would end a successful program and amount to
an unwarranted federal takeover of the student loan industry.
Private lenders would still have a role, albeit a greatly
diminished one, in servicing loans, such as helping collect
payments. Direct federal loans, unlike bank loans, must be
serviced by U.S. workers.
"Congress voted to stop wasting billions of taxpayer
dollars to subsidize big banks, and start investing that money
directly in our students and families," said House Education
and Labor Committee Chairman George Miller.
"With this one move, we will help students pay for college,
prepare them for our global economy, keep jobs in America and
reduce the deficit," Miller said.
The House of Representatives approved the measure last
year, but it got stalled in the Senate in the face of a
threatened Republican procedural roadblock that takes 60 votes
in the 100-member chamber to clear.
Democrats avoided the roadblock by putting the student loan
measure into the package of changes on the healthcare measure,
which needed only a simple majority to pass.
"It's a very bad idea," Senate Republican leader Mitch
McConnell said in denouncing the student loan overhaul.
"We now have the government running banks, insurance
companies, car companies" and Democrats want the government to
now "take over the student loan business," McConnell said.
(Additional reporting by Kevin Drawbaugh; Editing by David
Alexander and Peter Cooney)