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.

Boosting college aid 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 still calls budget "gimmicks" in the legislation, mainly because of the increased aid for poor students, one of his longtime priorities.

"Pell Grants send an important message to students in need," Bush said. "If you work hard, and you stay in school, and you make the right choices, the federal government is going to stand with you."

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.

Bush wanted Congress to direct even more money into Pell Grants, and the president tersely noted his objections.

"This bill makes some spending commitments that aren't paid for yet," he said. "I look forward to working with the Congress to ensure Pell Grant increases that are not fully funded in this bill are paid for with offsets in other areas."

The president drew attention to a provision he likes, new flexibility on college-loan payments for military personnel on active duty.

And he praised the Democratic chairman of the House education committee, Rep. George Miller of California, for working with him. In doing so, Bush prodded Miller to stick with him on No Child Left Behind — the president's education law, which faces a tough renewal fight in Congress.

The action by Bush amounted to a rare compromise with Democrats.