Congress on Sunday night approved a vast rewrite of college aid for needy students—a measure that might lead to big job losses at Sallie Mae, one of Indiana’s biggest employers.

The legislation, piggybacked to the health care reform measure, would end a four-decades-old program and its reliance on private lenders. It would authorize the government to originate all assistance loans and would use the savings to increase Pell Grants to students.

The overhaul is almost sure to bring big changes for Virginia-based Sallie Mae, the giant of the student loan industry. The company employs about 2,500 people in Indiana, including 1,700 in Fishers.

While Sallie Mae still could service loans, it would no longer be able to originate them. The result could push the company to reduce its 8,100-person work force by as much as one-third, it has estimated. It’s uncertain whether all three of the company’s Indiana offices—in Indianapolis, Fishers and Muncie—would survive.

But it’s also possible the region could gain jobs. In response to the pending legislation, Sallie Mae last year threatened to hack its network of 26 offices down to just five. The local offices have capacity to add 750 workers. And site selection consultants say the state’s labor quality, real estate costs and overall business costs make it an attractive locale for consolidation.

As the biggest piece of education legislation since No Child Left Behind nine years ago, the bill would direct more than $40 billion over 10 years into higher education, with $36 billion going toward the popular but financially strapped Pell Grant program. Historically black colleges and community colleges also would receive a share of the money.

The Senate could take up the bill this week under the same expedited rules used for health care legislation. That means the Senate could pass the education measure by a simple majority, virtually guaranteeing its success despite qualms from some Democrats and opposition from Republicans.

House lawmakers passed the bill last year, but it failed to get action in the Senate, where it did not have 60 votes to overcome a near-certain filibuster. By riding shotgun on the fast-track health care bill, the legislation now can avoid that obstacle.

Sallie Mae and other private lenders have conducted an all-out lobbying effort against the bill, arguing it would cost thousands of jobs and unnecessarily put the program in the hands of the government. Under the college aid program, financial institutions provide college loans at low interest rates, the government guarantees the loans in the event of default and subsidizes private lenders when necessary to keep rates low.

Sallie Mae shares were trading late Monday morning at $11.46, down just 14 cents on the day. Investors in the company and its competitors initially panicked after the Obama administration proposed the plan in early 2009. They still view it as a negative, but not disastrous. Sallie Mae shares now trade at more than three times their March 2009 low.

By directing the government to originate loans, the legislation would see savings totaling $61 billion between now and 2019, according to the nonpartisan Congressional Budget Office.

That money would be used to finance a continuation of the Pell Grants and other higher-education assistance in the bill. But about $19 billion would be used for deficit reduction and to offset expenses in the health care legislation.

The legislation is not as generous as the bill the House passed last year. The government anticipates smaller savings than initially foreseen and the Pell Grant now faces a $19 billion shortfall. The bill provides $13.5 billion to fill that budget hole.

Congressional Democrats had to trim their original student loan plans, reduce spending for community colleges and eliminate about $8 billion in early childhood education money from their initial bill.

The bill proposes no increases in Pell Grants over the next two years and a modest increase over the five years that follow. The maximum Pell Grant, which a House-passed bill last year would have raised to $6,900 over 10 years, will now only increase to $5,900. The current maximum grant for the coming school year is $5,500.

Following Republican criticism, Democrats dropped a provision in the new bill that would have allowed the state-owned Bank of North Dakota to continue making federally financed student loans to students.

"That's out, end of the story," said Rep. Earl Pomeroy, D-N.D.