JACKSONVILLE, Fla., Jan. 14 - Two weeks before the release of what the administration says will be one of the tightest budgets in recent times, President Bush told college students Friday that he would propose a modest increase in Pell Grants, the nation's primary scholarship program.

Speaking at Florida Community College here with his brother Jeb, the state's governor, at his side, Mr. Bush said the 2006 fiscal year budget, scheduled for release the first week in February, would increase the maximum Pell Grant award by $100 each year for the next five years, to $4,550.

Mr. Bush announced the decision with some fanfare, before students and education officials in a large gymnasium. But his appearance seemed to underscore just how much the administration plans to cut back in an effort to meet its goal of halving the federal deficit in five years. The increase he announced would barely keep pace with the projected rise in inflation.

Further, Senator Edward M. Kennedy, a Massachusetts Democrat who joined with the president to pass the No Child Left Behind Act, warned on Friday that Mr. Bush's Pell Grant initiative should not be taken at face value. Mr. Kennedy noted that Mr. Bush proposed during the 2000 campaign to raise the maximum grant to $5,100, or $550 higher than the level the president urged Friday afternoon.

"I welcome the president's new proposal," Mr. Kennedy said, "but urge American families with kids applying to college not to count their chickens before they hatch. We've been down this road before."

Administration officials said they were not planning to put new money into the Pell program, which is aimed at benefiting low-income students. Instead, Mr. Bush said he planned to "reform" student loan programs, and a White House spokesman, Trent Duffy, said this meant reducing government subsidies to private lenders who provide student loans. The money saved, the president said, "will be plowed into the Pell Grant program."

White House officials said the reductions in the subsidies would not affect students or the amount of money they can borrow for higher education. Instead, those officials said, the cuts will reduce the profits of banks and other lenders in the student loan program.

For many years, the government has subsidized those loans, to encourage lenders to offer them at attractive rates. But Mr. Duffy said that in an era of extraordinarily low interest rates, the risk of loan default by students was now reduced and that the administration had determined that the subsidies were too generous.

"We are confident the lenders will stay in the program, because it is still highly profitable," Mr. Duffy said.

Mr. Bush also proposed Friday to make permanent a loan forgiveness program, passed last year, for students who become teachers of math, science and special education programs.

In keeping with his effort to expand education programs without committing new government money, he also said he would double the number of workers receiving job training. He argued that by reducing government mandates, "we can double the number of people trained under the Workforce Investment Act for the same amount of money."

"Government tends to change incrementally,"' he warned, "and as it does, there's another set of rules and another set of regulations. And then, sure enough, after a while, you wake up and the money has got a lot of strings to it."

As for the Pell Grants, the Bush administration's Education Department rewrote eligibility requirements last year in an effort to cut the program's cost, which could easily surpass $12 billion in the fiscal year that began Oct.1.

Because of those changes, which take effect next fall and are expected to save the government $300 million in the 2005-6 academic year, at least 1.3 million students will receive smaller Pell Grants, according to two analyses of the new rules. Mr. Bush noted Friday, however, that a million more students were receiving grants now than received them when he took office.