The House approved a long-disputed budget package Wednesday, setting the stage for a record cut of about $12 billion from federal student aid programs.

The budget reconciliation bill – known as the Deficit Reduction Act, and designed to save about $40 billion over five years – passed in the House after a narrow vote of 216-214.

The House had passed an earlier version of the bill on Dec. 14, 2005, but needed to give the measure a second approval after the Senate added some minor modifications before voting on it last December. The bill has now been sent to the White House, where it is almost certain to be signed into law.

Luke Swarthout, a higher education adviser to the non-profit public interest group State Public Interest Research Groups, said that the cut would hurt college students’ ability to repay their loans.

“This bill takes $12 billion from student aid, which mostly comes from students and parents,” Swarthout said. “Over the years students have been going deeper and deeper into debt, and instead of helping these students out, the Congress is cutting money from the aid.”

The bill does include some new programs designed to benefit students, however.

Scott Fleming, assistant to the university president for federal relations, said that the measure creates a merit-based grant program for students eligible for Pell Grants, a major federal aid program targeted at undergraduate students.

The new grant program “will help low-income students who qualify for Pell Grants to pursue their education,” Fleming said.

This new program, dubbed the Academic Competitiveness Grant, will also require students to complete a “rigorous secondary school program” in order to receive federal aid, Fleming said. The program must be approved by the secretary of education and would help students studying math, science and foreign languages.

Critics of the program and others like it, however, argued that the budget cut still hurts students.

While Bush and House Republicans had promised to increase the maximum Pell Grants for low-income students by $100, the maximum Pell Grant was frozen for the fourth consecutive year at $4,050.

Tom Kiley, spokesman for Rep. George Miller (D-Calif.) said that he is disappointed that the bill does little to address continuing problems with Pell Grant levels.

“Once again, we missed an opportunity to raise the Pell Grant,” Kiley said. “That is a glaring omission.”

The bill also permits a planned change in the student loan interest rate. Under the present policy, interest rates vary from year to year based on market situations, with a cap at 8.25 percent. The new bill, however, would fix interest rates at 6.25 percent starting this July, raising the rate from the current 5.3 percent.

The budget cut will also increase financial pressure on parents by raising parent loan interest rates from 7.9 percent to 8.5 percent and decreasing federal subsidies to banks that lend money to students.

Republicans on the House Committee on Education and the Workforce, which has jurisdiction over student loan programs, said that the bill would actually strengthen efficiency in student loan programs by reducing subsidies to banks. A press release from the committee said that first-year student limits will increase from $2,625 to $3,500 and second-year student limits will increase from $3,500 to $4,500. The committee also argued that the measure would provide more aid to students by increasing federal loan limits for first- and second-year students.

Swarthout criticized the House’s approval of the bill and said that the student aid cut goes against education policy goals proposed by President Bush during the State of the Union Tuesday.

“I think that it runs entirely counter to president’s message regarding education,” Swarthout said. “If we [want to] compete globally, it requires us to educate more of our citizens at a higher level. The loan has come to a higher level, [and] we need to make sure most loans will be paid more affordably.”

Kiley said that students have been attempting to gather grassroots support nationwide to voice their opinion on the bill and added that Georgetown students have been credible and aggressive in their campaign.

“Congressman Miller really appreciates it,” he said. “It’s unfortunate that Congress didn’t listen to students.”

“Loans have been a much bigger part of the students’ financing their education,” Kiley added. “People rely much less on scholarship. That’s a trend that we want to reverse.”