US House of Represenatives oks Overhaul of GSL program.

Voting 253 for and 171 against, the House on Sept. 17 passed a bill (HR 3221) to shift federally backed student loans to direct lending by the Department of Education, excluding the private-sector lenders who now dominate the government program. The bill would save $87 billion over ten years by ending the private lenders' taxpayer subsidies, guarantees and bailouts. The savings would be used, in part, to expand Pell Grants for poor students and Perkins Loans for middle-income students. Pell Grants would be converted to an entitlement program and increased from today's cap of about $5,350 annually to $5,550 in 2010 and $6,900 by 2019.

The $55 billion annual student-loan market is split between federally backed private lending and the government's direct lending. The rules allow banks and other private firms to keep all interest revenue while shifting their losses to taxpayers. Some private portfolios have received Treasury bailouts during the current recession.

Over ten years, $10 billion of the bill's $87 billion in savings would be allocated to community colleges; $8 billion to early-childhood education; $8 billion to reducing the national debt; $6.6 billion for K-12 and higher-education classroom construction, and $2.55 billion to institutions serving mainly blacks, Hispanics, native Americans and other minorities, along with allocations to Pell Grants, Perkins Loans and other programs.

The bill awaits Senate action.