Financial Aid Bill Under Consideration

WASHINGTON — The U.S. House and Senate are expected to vote soon on a proposed bill that could increase aid to college students by cutting federal incentives to banks that offer student loans.

Negotiators from both parties reached an agreement in September to reduce subsidies to banks by $20 billion in an effort to curb government spending on the student loan industry.

If approved, the bill would increase the funds directed toward federal Pell grants, which are issued to college students of low economic status. The maximum amount of Pell grants would increase from $4,310 to $5,400 by 2012. Interest rates on federally backed student loans would also be reduced during the next four years from 6.8 percent to 3.4 percent.

Under the new bill, the government would also grant loan forgiveness to college graduates who go into public service professions, such as teaching, and would set a per-income cap on annual loan payments to prevent students from paying back more than they can afford.