Tucked into Sunday’s health care vote was a bill passed by Congress this week, which endorsed President Obama’s plan to overhaul the federal student loan system. Now the legislation moves on to the Senate, where leaders think they have the votes to get it passed.

The Chronicle of Higher Education reports,

The House passed a version of the student-loan bill back in September, but Democrats did not have enough votes to get it approved in the Senate. The version approved Sunday, as part of a package with the health-care measure, represents a compromise that reduces the amount of money being dedicated to education programs.

The most major accomplishment of the bill will be the national switch from the Federal Family Education Loan to the Direct Loan program. Critics of FFEL claims it’s incredibly wasteful, and the bipartisan Congressional Budget Office has reported that the FFEL’s elimination will save $61 billion over the next 10 years. Instead of going to a bank for a loan, students will be able to apply for them through the college’s financial aid office, thus decreasing the fees paid to banks and lowering both interest and denial rates. Take a look at a helpful comparison of the old and new ways.

However, Penn State will not be affected by the switch to Direct Loans… the university made that move way back in 2008.

The majority of the money saved by the switch to Direct Loan administration will be redirected into Pell Grant funding.

As it turns out, the bill hasn’t lived up to expectations, according to Mark Knatrowitz, an expert interviewed by the New York Times. Originally, the maximum amount for Pell Grants was going to be raised from $5,550 to $6,900. However, the final version of the bill only increases the maximum to $5,900 over ten years. Kantrowitz claims that this won’t do enough to match the inflating cost of college. In any event, the maximum will not stay the same through 2013.

Another outcome is that the terms for repaying income-based student loans will change. The percentage of income on which payments are based will decrease, and the forgiveness period will be reduced from 25 years to 20 years. However, this policy won’t be enacted until July 1, 2014, so few current Penn State students will feel the benefits.

[Photo via the White House’s Flickr account]