WASHINGTON D.C. (ASRN.ORG) -- Congress approved legislation that cuts more than $20 billion in government subsidies to institutions through banks, but funnels it directly to the colleges that make student loans. The House voted 292-97 for the student aid bill after the Senate approved it by a wide margin of 79-12.

The bill increases the maximum Pell Grant, which goes to the poorest students,
from $4,310 a year to $5,400 a year by 2012. It also cuts the interest rates on federally backed student loan programs from 6.8 percent to 3.4 percent over the next four years.

All the lawmakers that voted against the new bill were Republicans.

The bill affects the Pell grants, which goes to the poorest college students. The bill also includes a loan forgiveness program for nurses that work for 10 years in
public service programs.

Senator Edward M. Kennedy (D-Mass.), the chairman of the Senate education committee, stated that "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."

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.

"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.

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.

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