Health Bill Is Rx for Student Loans, Too

Part of the Democratic health care reform was sent back to the House of Representatives Thursday because of two minor changes to a section of the bill that has nothing to do with health care.

In fact, until now, many people didn't know that tucked into the health care bill are some of the most sweeping changes in decades in a different area - helping students pay for college.

CBS News correspondent Ben Tracy reports Colin and Corey Fequa are caught in the middle of the fight raging in Congress. They had to drop out of Delaware State after racking up a combined $55,000 in debt for tuition, room and board, and books - in just two years.

"You need some type of degree to go far and get some type of career," Corey Fequa said.

For their single mom, Karen, the college costs were crushing.

"I try to be a good mother," she said. "I felt I failed as a mother."

But now they may get help from the health care bill. The new law includes $36 billion for Pell Grants, free government funds given to 6 million low-income students. The maximum Pell Grant would jump from $5,300 this year to nearly $6,000 by 2017. Without the new law, it would have dropped to $2,150 next year.

"It adds up to $1,600 over four years," said Lauren Asher, president of the Project for Student Debt. "That's a lot of money that people won't have to borrow and will help them pay for college."

President Obama wants the United States to lead the world in the number of college graduates by 2020. The nation now ranks 14th. South Korea is first.

But critics say this new student aid is still not enough to make college affordable. Thirty years ago, Pell grants covered 77 percent of the average tuition. Now they cover just 35 percent.

"The buying power of the Pell Grant will be much less over the next 10 years than it has been in the past," said Mark Kantrowitz, founder of finaid.org. "It will not keep pace with inflation."

And banks give the new college aid plan an 'F' - because they lose business.

Right now the government offers loans to students, but it also pays private banks to do the same thing. The government even covers the bank's losses when students default on their loans. Now the government is cutting out the middleman and going to make all the loans itself.

"It is not enough to take over car companies?" Sen. Lindsey Graham recently griped. "Do we have to become the only bank in America to give a student loan?"

But the non-partisan Congressional Budget Office says bypassing the banks will save taxpayers $61 billion in bank subsidies over 10 years and cut the deficit by at least $10 billion.

For Colin and Corey, the grant money will help pay for community college - a much less expensive way to get the diploma they can't afford to lose.