WASHINGTON (Reuters) - President Barack Obama on Tuesday will sign into law an overhaul of the college student loan program which cuts commercial banks out of the student loan business, drying up a multibillion dollar profit stream.
The student loan overhaul fulfills a long-time goal of Democratic lawmakers to end the bankers’ role as middlemen and replace them with direct federal loans and aid to students.
The White House said the change would save taxpayers $68 billion over the next decade. The money saved will help expand and strengthen the federal Pell Grant program for students.
The change will cap college graduates’ annual student loan repayments at 10 percent of their income, spends more at community colleges and awards $2.55 billion to historically black colleges and universities.
Obama’s fellow Democrats in the Senate and House of Representatives got the measure through Congress by tucking it into a package of changes approved last Thursday to the sweeping U.S. healthcare overhaul.
While the healthcare overhaul itself has generated skepticism among many Americans worried about its cost and associated debt, the student loan changes have been popular.
The CNN/Opinion Research Corporation said last week a telephone survey of 1,030 adult Americans found 64 percent of respondents approved it, while 34 percent opposed it.
Obama is to sign the measure at an event at Northern Virginia Community College in nearby Alexandria.
“Year after year, we’ve seen billions of taxpayer dollars handed out as subsidies to the bankers and middlemen who handle federal student loans, when that money should have gone to advancing the dreams of our students and working families,” Obama said in his weekly radio and Web address on Saturday.
He said previous efforts to change the program had been thwarted by “special interests that fought tooth and nail to preserve their exclusive giveaway.”
While student groups and Democratic lawmakers have backed the overhaul, student loan giant Sallie Mae and other private lenders have staunchly opposed it.
Opponents 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 unemployment rate.
A number of lawmakers, most Republicans, 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.
Reporting by Steve Holland; editing by Todd Eastham