College students read on the quad.
College students read on the quad. - 


Lisa Napoli: That $25 billion deal to buy student lending giant Sallie Mae? It's gone belly-up. Investors want out of the deal. Blame it on the credit crunch and new legislation on student loans that the President's signing today that cuts federal subsidies. Marketplace's Renita Jablonski has details.

Renita Jablonski: The new law puts the $20 billion directly into the hands of students. It's the largest jump in student aid since the G-I Bill back in the 1940's. The Bush Administration had threatened to veto the bill, but it got bipartisan support in Congress.

The push started with Robert Borosage at the nonprofit Campaign for America's Future. He says the bill was an easy sell on both sides of the aisle:

Robert Borosage: We've got an entire generation of working and middle-class people that understand that the ticket to their children being in the middle class is to get to college. And yet, we're pricing more and more students out of college.

Borosage says tuition's gone up about 40 percent since 2000, while incomes have stagnated.

Over time, the bill slices the interest rates on student loans by half. It'll limit loan repayments to 15 percent of income.

The changes take effect October 1st.

I'm Renita Jablonski for Marketplace.