President Bush on Thursday signed legislation designed to make college more affordable for students from poor and middle-class families, swallowing objections to a bill that enjoyed veto-proof majorities in Congress.

The new law achieves a goal Bush shares with lawmakers: boosting aid for needy students. The action allows both the Bush administration and Congress to say they have done something to ease the burden of paying for college, a popular political priority.

"I have the honor of signing a bill that will help millions of low-income Americans earn a college-degree," Bush said in a ceremony, with lawmakers and students by his side.

The legislation boosts 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 cuts in half the interest rates on federally backed student loans -- from 6.8 percent to 3.4 percent -- over the next four years.

The increase in financial aid is designed to come from cuts in subsidies that the government makes to banks, totaling roughly $20 billion.

The boost in financial aid to college students was one of a half-dozen domestic priorities Democrats set when they took control of Congress this year.

Bush at one point threatened to veto the bill on grounds that it included hidden costs and was an expensive expansion of federal programs. Yet he went along, despite what his administration calls budget "gimmicks" in the legislation, mainly because of the increased aid for poor students, one of his longtime priorities.

Congress overwhelmingly backed a compromise version of the student-aid bill earlier this month. The House approved it 292-97; the Senate vote was 79-12. All the lawmakers who voted against the bill were Republicans.