President Barack Obama recently signed a bill into law that aims to overhaul student aid by implementing direct student lending at colleges across the nation.

But this won't mean much of a change for the University where direct student lending has been in place for years. In fact, current and former University officials were involved in the development of the concept of direct student lending, and the University served as a testing ground for the program.

Thomas Butts was the director of the University’s Student Financial Aid office from 1971 to 1977, and later, the deputy assistant secretary for Student Financial Assistance for the federal government during President Jimmy Carter’s administration from 1977 to 1981. Butts then worked in the University’s Office of Government Relations in Washington D.C. in the early 1990s, during which time he collaborated with former State Rep. William Ford (D–Mich.) to develop a direct student lending pilot program for select schools across the nation.

In 1994, the University became one of 100 schools to take part in the direct student loan initiative. According to Butts, the decision to take part in the program was largely due to the desire of former University President James Duderstadt to change financial aid programs at the University and asked Butts for help in getting this accomplished.

“My role was to develop this idea of the direct loan program and I brought that in and developed it with other colleagues to get it enacted, which we did,” Butts said. “But we were never able to achieve the goal of transforming the student loan programs into one program that worked well for students and schools and taxpayers until the (recent overhaul) bill was passed.”

Butts said another key feature of the new legislation is its reallocation of federal funding toward education and the increase in the amount of money available for grants.

“One of the things that’s most important about (the bill) isn’t necessarily that direct lending is now in place, but the fact that it has redirected well over $60 billion to education programs and a variety of other things, particularly Pell Grants.” Butts said. “That is a major accomplishment.”

The bill — together with the health care bill signed by Obama on the same day — aims to save taxpayers an estimated $61 billion over 10 years by getting rid of bank subsides. As outlined by the legislation, the conserved funds will then go toward increasing student loans through Pell Grants, health care reform and reducing the national deficit.

The legislation also eradicates the Federal Family Education Loan Program at colleges across the country and replaces it with the Direct Loan Program, allowing the federal government to give loans directly to students without banks serving as middlemen.

Butts called this a historic piece of legislation for the country and a “transformational moment in the history of financing student financial aid.” He compared it to past student aid initiatives that are still in place today like the establishment of the National Defense Student Loan Program — now known as the Perkins Loan — in 1958, the work study and supplemental grant program founded in 1965 and the Pell Grant program established in 1972.

Margaret Rodriguez — senior associate director of the University’s Office of Financial Aid — worked in the Office of Financial Aid while Butts was in Washington developing the pilot program. After he successfully launched the program and secured a spot for the University among the 100 schools chosen for the initiative, she took on the role of implementing the program on campus.