The Education Affordability Reconciliation Act

After months of impassioned debate and partisan squabbling, the House of Representatives passed healthcare reform legislation late in Mid-March, fulfilling one of President Obama's central campaign promises. Overshadowed by the historic measure was a college financial aid bill that will fundamentally transform the way students fund their post-secondary education.

With the cost of higher education increasing across the country, the Education Affordability Reconciliation Act, which Democrats passed in conjunction with the healthcare bill, will effectively remove middleman lenders and put the federal government in charge of the majority of student loans. The act, which passed the House by a vote of 220-211, will end the 45-year-old Federal Family Education Loan program and eliminate unwarranted subsidies to banks. The initiative will be replaced by the expansion of direct federal lending to college students, sweeping aside private competitors and saving the government and its taxpayers an estimated $61 billion over ten years, Reuters reports.

"It's time to stop wasting billions of taxpayer dollars to subsidize big banks, and start investing that money directly in our students and families," said Representative George Miller, a California Democrat who authored the legislation. "With this one move, we will help students pay for college, prepare them for our global economy and keep jobs in America," he added.

The money saved from the reform package, which is being heavily criticized by large financial institutions such as Sallie Mae, will be used to provide more funding to low-income students through a revision of the Pell Grant program. Additional savings will go toward helping to pay for healthcare reform and reducing the federal deficit.

As of July 1, the federal government will begin extending more grants to needy students and will increase the maximum annual Pell Grant scholarship to $5,550, according to the Committee on Education and Labor. By 2020, the maximum amount will be increased to nearly $6,000 per year. Other than increasing grants and lending, the new bill will also place caps on student loan repayments and will invest more money in minority colleges and universities, the Associated Press reports.

"The average student ends up with more than $23,000 in debt," said Obama. "So when this change takes effect, we'll cap a graduate's annual student loan repayments at 10 percent of his or her income." The cap on loan repayments will be implemented in 2014.

Unfortunately, the good news for current and prospective college students was slightly tempered by the fact that the legislation fell short of the Student Aid and Fiscal Responsibility Act, which was the model for the current bill. That measure was passed in the House last September, but never garnered enough votes to be approved in the Senate.

In an effort to win enough votes to pass the Healthcare and Education Affordability Reconciliation Act, Obama and other Democratic leaders had to eliminate certain provisions in the bill, including improvements to the American Graduation Initiative, the Perkins Loan Program and the College Access and Completion Fund, University World News reports. Obama was also forced to renege on his promise to provide $12 billion in funding to community colleges, who will receive $2 billion instead.

"This is the very first time the federal government is providing direct aid to community colleges," said Eduardo Marti, president of Queensborough Community College, quoted by the news source. "So even though $2 billion is one-sixth of what we were hoping for, it's really welcome."