To help the United States achieve the goal of having the highest proportion of college graduates in the world by 2020, President Obama signed the Student Aid and Fiscal Responsibility Act (SAFRA) into law on March 30, 2010.

Under SAFRA, all new Federal student loans will be made through the stable, effective, and cost-efficient William D. Ford Direct Loan program, instead of through the Federally-guaranteed student loan program.  Unlike this lender-based program, the Direct Loan program is insulated from swings of the private financial markets and can, therefore, guarantee students access to affordable college loans. Switching to the Direct Loan program will also save taxpayers more than $60 billion over ten years, according to the non-partisan Congressional Budget Office.

To implement the law and progress toward the longer term goal of a higher proportion of college graduates, the Education Department adopted a near-term goal that all participating higher education institutions and loan servicers would be ready to make Federal Direct Student Loans by the end of Fiscal Year 2011.  It also committed to using an efficient and effective student aid delivery system with simplified applications and minimal disruption to students.

By July 1, 2011, all (100%) of the nearly 3000 domestic and foreign schools that want to participate in Direct Loans were doing so. Federal Student Aid (FSA) quickly updated its systems, increased capacity, and provided specialized training and technical assistance to ensure a smooth transition to Direct Loans for these institutions.