The federal government will no longer give money to banks to lend to students. It will instead loan that money directly to students at the federal (less expensive) interest rate.
The Student Aid and Financial Reconciliation Act basically ends government subsidies for private student loans, and uses the savings to expand the government’s Pell Grant student loan program.
Democrats believe the act will save the government money ($61 billion) and help make college more affordable for students, by eliminating the middle men (banks). Republicans fear that cutting banks out of the higher-education equation will hurt the private sector, and push the government into debt by making it the sole financier for college tuition.