I'm still looking for an explanation for the abrupt about-face on this (I'm guessing it bought a needed vote to pass the healthcare bill) and will fill you in when I find out:

WASHINGTON — Along with the major health care legislation, the House on Sunday was poised to approve a major revamping of federal student loan programs that would eliminate fees paid to private banks to act as intermediaries.

Instead, the government would expand an existing direct lending program, a step that the Congressional Budget Office said would save taxpayers $61 billion over 10 years, and use the money to increase Pell grants for needy students.

The student loan bill is a centerpiece of President Obama’s education agenda, and it was included in the budget reconciliation measure that also makes final revisions to the Senate-passed health care bill.

The bill would set automatic annual increases in the maximum Pell grant, which is set to rise to $5,975 by 2017 from $5,350 this year.

The new Pell initiative also includes $13.5 billion to cover a shortfall caused by a steep rise in the number of Americans enrolling in college and seeking financial aid during the recession.

UPDATE: Apparently it did pass, added as a last-minute amendment in the final package. Not sure why there's contradictory stories.