Student-Lending System Made Over in Health Law

The health-care-overhaul bill that received final approval from Congress last week also makes major changes to the federal student-lending program, helping to shore up access to Pell Grants.

But proposed substantial new spending on early-childhood education was jettisoned, after Democrats found that the estimated savings from the planned student-loan overhaul would be too meager to pay for several new education priorities.

The student-loan revamp effectively eliminates the Federal Family Education Loan Program, which provides subsidies to student lenders. Instead, all loans would originate through the Direct Loan program, in which students borrow from the U.S. Treasury. The bill uses the savings in part to help shore up the Pell Grant program, which helps low-income...