Washington : US President Barack Obama said changes to the federal student loan programme, part of the healthcare overhaul package enacted last week, will save taxpayers $68 billion (Dh249.6 billion) over the next decade by taking private lenders out of the business of originating loans.
In his weekly address on radio and internet, Obama called education and health care "two of the most important pillars of a strong America". He thanked Congress for passing the measures, calling them "real and major reform".
"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.
He also spotlighted a doubling in funding for Pell Grants, the federal scholarships for low-income students, and a provision that as of 2014 will cap a graduate's annual student loan repayment at 10 per cent of their income. These moves, he said, will help "make sure our students don't go broke just because they chose to go to college".
Obama said easing the burden of tuition costs will help the US "once again have the highest proportion of college graduates in the world".
The legislation, he said, calls for "revitalising" programmes offered at community colleges. He termed those schools "the career pathways for millions of dislocated workers and working families across the county".
The measure also increases support for institutions that focus on minority students, including historically black colleges, which Obama said will keep these schools "as strong as ever in this new century".
Private lenders have said the legislation will cost them jobs. SLM, the Reston, Virginia-based lender called Sallie Mae, said the measure's passage will force it to fire 2,500 workers.
America's Student Loan Providers, an industry lobbying group based in Washington, has cautioned that customer service will suffer.
Existing lenders will compete for contracts to service the government loans, according to the education department.
In the Republican address, Senate minority leader Mitch McConnell of Kentucky decried the passage of the healthcare measure, which he said had spurred "one of the most divisive legislative debates in modern history".
McConnell said the overhaul package will put personal decisions "into the hands of federal bureaucrats", cause insurance premiums to rise, cut Medicare by more than half a trillion dollars, and impose new taxes on businesses.
McConnell said the measure is "terrible news" for the economy, citing farm-machinery maker Deere & Co.'s announcement that the law will increase the Moline, Illinois-based company's expenses by $150 million this fiscal year. He also noted projections by Peoria, Illinois-based Caterpillar, the world's largest maker of construction equipment, that the law will cause it to record a charge of about $100 million due to new tax liabilities.