WASHINGTON — President Barack Obama said Saturday a new law he'll sign this week will save the federal government billions and give college students more help paying tuition.
"This reform of the federal student loan programs will save taxpayers $68 billion over the next decade," Obama said in his weekly radio and Internet address.
"And with this legislation, we're putting that money to use achieving a goal I set for America: by the end of this decade, we will once again have the highest proportion of college graduates in the world."
The changes in the Health Care and Education Reconciliation Act of 2010 will save federal taxpayer money by ending government subsidies to banks and other institutions that process student loans. Critics have called it a government takeover of the student loan industry.
"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.
Obama said the money saved by making loans directly to students will allow the government to expand the federal Pell Grant program for college students, in part by increasing them to keep pace with inflation.
He said the law also will cap college graduates' annual student loan repayments at 10 percent of their income, increase support for Minority Serving Institutions, and help improve community colleges. The changes take effect in 2014.
Two out of three college students take out loans, he said, and the average student emerges with $23,000 in debt.
"To make it sure our students don't go broke just because they chose to go to college, we're making it easier for graduates to afford their student loan payments," he said.
The changes in the federal student loan program were added to the second health care bill passed last week by Congress.
Former Bush White House Press Secretary Dana Perino on Friday suggested that adding the student loan provision to the health care bill was unethical because Congress didn't hold hearings on the student loan proposal.
"It's frustrating that a law this sweeping was swept under the Obamacare rug," she said. "The Senate never introduced a student loan reform bill. It never held a hearing. And proposed changes to the student loan program were never even considered by lawmakers at the committee level."
Obama plans to sign it into law Tuesday at a community college in Virginia.