President Clinton signs Student Loan Reform Act, creating Federal Direct Loan Program

President Bill Clinton signs the Student Loan Reform Act of 1993, eliminating the federal family Education Loan (FFEL) program middlemen—Sallie Mae and private lenders—and creating the Federal Direct Loan Program, where the Education Department makes loans directly to students. The legislation cuts $4.3 billion from federal spending over five years by reducing administrative costs. Direct Loans will eventually become the largest federal student loan program. The act also expands income-contingent repayment options, allowing borrowers to cap payments based on earnings rather than loan balance.