A rider bill attached to — and somewhat overshadowed by — President Barack Obama’s landmark health-care reform will remodel the student loan system by cutting out private lenders and setting aside billions more in federal dollars for financial aid.

Currently, the U.S. government provides money to banks or corporations which arrange loans for students, then collect interest at a profit. According to the Congressional Budget Office, bypassing private lenders and giving loan funds directly to students will save the federal government $1 billion over the next year alone, and $62 billion over the next 10 years.

The vast majority of that $62 billion will be reinvested in Pell Grants, $13 billion of which will be devoted to increasing student eligibility and avoiding a cap on the money students can receive.

The additional funds will push the maximum award for the 2010-11 academic year from $5,350 to $5,500. The federal government is covering this increase and allowing for more like it by 2010 with $36 billion in additional aid.

Of the remaining $13 billion in government savings, $10 billion will go toward reducing the federal deficit and about $2.55 billion will go to institutions that serve minorities.

The larger health-care bill also affects students with a provision that allows all Americans to stay on their parents’ health-care policy until age 26, instead of the more typical 19.

Readers can contact Hayley Bisceglia-Martin at [email protected].