SAFRA, the Student Aid and Financial Responsibility Act, passed the House of Representatives yesterday in a 253-171 vote. If passed by the Senate later this fall, SAFRA will end government subsidies to private student loan companies, move those loans federal direct loan program, and use the savings to increase aid to students and colleges by $8 billion a year.

This is a very big deal.

The House’s endorsement of loan reform is a huge step forward, but SAFRA contains another component that’s also worth paying attention to. Since 1998, the Higher Education Act’s Aid Elimination Penalty (AEP)  has denied federal financial aid to students with drug convictions on their records. Commit robbery or rape and you can still receive financial aid, but if you’re busted with pot you’re out of luck.

Two hundred thousand American students have lost financial aid because of this law since it went into effect a decade ago, but in the version of SAFRA passed yesterday, the AEP has been scaled back dramatically. If the House language makes it into the final bill, AEP will now apply only those students who are convicted of selling drugs while actually receiving financial aid.

Observers are predicting a tough fight for SAFRA in the Senate, where private lenders are gearing up to protect their turf. We’ll keep you informed as the situation develops.