President George H. W. Bush authorized a pilot version of the Direct Loan program, by signing into law the 1992 Reauthorization of the Higher Education Act of 1965.
President Bill Clinton set a phase-in of direct lending, by signing into law the Omnibus Budget Reconciliation Act of 1993, although in 1994 the 104th Congress passed legislation to prevent the switch to 100% direct lending.
Funding for the Federal Direct Student Loan Program decreased from $7 billion in 2006, to only $509 million budgeted for 2008.
President Obama organized all new loans under the Direct Loan program by July 2010, netting $6 billion in annual savings. The switch to 100% Direct Lending effective July 1, 2010 was enacted by the Health Care and Education Reconciliation Act of 2010.
In comparison, other countries have also experimented with government-sponsored loan programs. New Zealand, for instance, now offers 0% interest loans to students who live in New Zealand for 183 or more consecutive days (retroactive for all former students who had government loans), who can repay their loans based on their income after they graduate. This program was a Labour Party promise in the 2005 general election.