President Bush signed the largest increase in college aid since the 1944 GI Bill into law Thursday, reducing interest rates on loans by half and increasing Pell Grant scholarship amounts over the next five years.

Arizona will see a statewide increase of $1.2 billion in financial aid funding and programs over that span, according to the U.S. House of Representatives’ Committee on Education and Labor.

The College Cost Reduction Act of 2007, introduced by U.S. Rep. George Miller (D-Calif.), will will also provide loan forgiveness for public servants, create grant programs for future teachers and reward colleges and universities that keep tuition low, according to the act.

The federal

government will fund the aid increase by reducing subsidies given to student aid lenders. No new taxes are planned to help foot the bill, according to a summary of the bill given to legislators.

“”It’s been a challenge that’s been worked on for many, many, many years,”” said Tommy Bruce, president of the Associated Students of the University of Arizona, of the aid increase. The Arizona Students’ Association and ASUA worked on a local level to gain support for the new bill.

“”It really is very, very exciting, and it shows commitment on the federal level in aiding in the cost of higher education,”” Bruce said.

There are 212,968 Pell Grant scholarship recipients in Arizona, according to the Committee on Education and Labor.

The maximum Pell Grant scholarship amount will increase to $5,400 by 2012 from $4,310 in 2007.

Interest rates on Federal Subsidized Stafford loans will be reduced to 3.4 percent for the 2012-2013 school year from the current rate of 3.4 percent.

Loan forgiveness will be granted under certain circumstances for students who go on to fields of national need, such as teaching, nursing and jobs in the public sector.

Federal loan repayment is guaranteed under the act to not exceed 15 percent of the borrower’s discretionary income. After 20 years, borrowers in economic hardship are also eligible for loan forgiveness.

The act also creates a grant program, called the Teacher Education Assistance for College and Higher Education, for students who plan to become teachers. Eligible students can receive $4,000 per year.

“”This (act) has a tremendous effect on the average student, especially those that are underrepresented in higher education institutions across the state and the nation,”” said David Martinez III, student regent on the Arizona Board of Regents.

Bruce said he thinks the new bill will increase the accessibility of higher education.

“”The more money we have in financial aid, the more opportunities we offer to citizens of the state of Arizona to go to one of our higher education institutions,”” he said.