Obama Signs Student Loan Overhaul Legislation

President Obama today signed into law the final piece of the health care puzzle, which mandates sweeping changes in the way the nation provides health care and makes the federal government the primary distributor of student loans.

"That's two major victories in one week that will improve the lives of our people for generations to come," Obama said.

To highlight the education reforms in the Health Care and Education Reconciliation Act of 2010, Obama signed it at the Northern Virginia Community College in Alexandria, Va., and focused on the largely overshadowed student loan reforms.

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The student lending overhaul ends the current program that subsidizes banks and other financial institutions for issuing loans, instead allowing students to borrow directly from the federal government. Interest rates for some borrowers will also be lowered.

Now, instead of having banks use government money to loan tuition, the government will lend the funds directly. Starting July 1, all new federal student loans will be delivered and collected by private companies under performance-based contracts with the Department of Education, according to officials.

"By cutting out the middleman, we'll save American taxpayers $68 billion in the coming years," the president said. "That's real money -- real savings that we'll reinvest to help improve the quality of higher education and make it more affordable."

Video of President Barack Obama signing student loan overhaul legislation.
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The law will also put a cap on annual loan payments for college graduates -- never exceeding 10 percent of their income. It will also increase the number of Pell Grants offered to low-income students. The changes are meant to revitalize community colleges and increase support for institutions that serve minorities and historically black colleges.

"Today, we mark an important milestone on the road to health insurance reform and higher education reform," Obama said.

"With the bill I signed last week, we finally undertook meaningful reform of our health care system. With this bill, and other steps we've pursued over the last year, we are finally undertaking meaningful reform in our higher education system," the president said.

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The president was introduced by Vice President Biden's wife Jill, an adjunct professor at the college. Obama announced that he has asked the second lady to host a White House summit on community colleges this fall.

Health Care for Seniors

The health care bill closes what's called the "doughnut hole" for seniors who use the Medicare prescription drug benefit.

Currently recipients pay 25 percent of their drug costs up to $2,830, and then they must pay the full amount up to $3,610 – which leaves a $780 coverage gap they have to pay.

But starting today, seniors who hit that coverage gap will get $250, and next year drug companies will discount drugs in the gap by 50 percent as federal subsidies start kicking in.

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"We're going to offer $250 to seniors who fall in the Medicare coverage gap known as the doughnut hole to help them pay for prescriptions, and that's a first step towards closing that gap completely," Obama said.

In 2013, the government will start paying 2.5 percent of the costs, but that will steadily increase to 25 percent.

Pre-Existing Conditions

There has been some confusion about the health care law and children with pre-existing conditions. The president has said starting this year no kids can be denied insurance because of a pre-existing condition.

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