Bill Boosting Student Aid Is Approved

Congress approved legislation yesterday that cuts more than $20 billion in government subsidies to institutions that make student loans, and uses most of that money to pay for increased financial aid for college students.

The bill would increase the maximum Pell grant, which goes to the poorest college students, from $4,310 a year to $5,400 a year by 2012.

It also would cut interest rates on federally backed student loans to poor and middle-class students from 6.8 percent to 3.4 percent over the next four years.

President Bush has indicated he will sign the bill, despite previous objections to some of its provisions.

The House voted 292 to 97 for the student aid bill after the Senate approved it 79 to 12. All the lawmakers who voted against the bill were Republicans. The administration had criticized the student loan interest-rate cut and a new loan-forgiveness program.

The boost in financial aid to college students was one of half a dozen domestic priorities Democrats set when they took control of Congress this year. Two others -- an increase in the minimum wage, and mandatory air and sea cargo inspections -- have become law, and a third, ethics reform, is awaiting Bush's signature.

"This is an exciting day for parents and students who struggle to put together the financial means to pay for college," said George Miller (D-Calif.), chairman of the House education committee.

Howard P. "Buck" McKeon (Calif.), the ranking Republican on the committee, said, "What once was a campaign promise has become a trap that will ensnare either students or taxpayers." He warned that students will go back to paying the higher rate in four years or taxpayers will have to foot the bill for the cut to continue.

Banking industry officials have objected to the roughly $20 billion cut in subsidies to lenders, saying they might have to reduce services provided to borrowers because of the legislation.

The loan-forgiveness program in the bill benefits college graduates who work for 10 years in public service professions, such as teaching or nursing.

"Lenders will no doubt continue to complain that the cuts in this bill are too deep, but the reality is that our bill restores the balance to this grossly unfair student loan system by directing funds to the students, not to the banks," said Edward M. Kennedy (D-Mass.), the chairman of the Senate education committee.