Congress boosts financial aid to students, takes from lenders

Students who enter certain public sector jobs would have their debts erased under the plan, the total cost of which would be offset by slashing government subsidies to lenders. It also calls for a $510-million investment in minority colleges.

The program would have particular impact in California, which has more recipients of low-income student grants than any other state. The bill's increases to those Pell Grants are expected to benefit about 5.5 million needy students nationwide.

Democrats hailed the legislation, describing it as the largest college aid package since the 1944 GI Bill and a boon to families at a time of skyrocketing college costs. But lenders warned that the bill would drive smaller financiers out of business, leaving students with fewer and less attractive loan options. Republicans argued that it would burden taxpayers with costly new entitlement programs.

Despite GOP opposition, President Bush indicated Thursday that he would rescind an earlier threat to veto the bill and would sign it into law.

Passage of the College Cost Reduction and Access Act comes at a time when college costs have soared nearly 40% in the last five years. It also coincides with increased scrutiny of the $85-billion student-loan industry, which has been shaken by recent scandals involving conflicts of interest among lenders and school officials, as well as kickback schemes.

Democrats campaigning to retake control of Congress in last year's midterm election focused on the issue, with now-House Speaker Nancy Pelosi (D-San Francisco) declaring that cutting student loan interest rates in half would be one of her party's top priorities.

On Friday, one of the bill's sponsors, Rep. George Miller (D-Martinez), described the bill's passage as a victory for middle-class families. "This bill takes extraordinary steps to bring urgently needed financial relief to students and families who are working very hard to pay for college," he said.

The leading Republican on the House Budget Committee, Rep. Paul D. Ryan of Wisconsin, said Democrats were not being upfront about the bill's cost to taxpayers.