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Education Aid at What Cost? Clinton's $50 Billion Plan Has Skeptics Even on Campus

By Rene Sanchez and Clay Chandler
Washington Post Staff Writers
Monday, February 3, 1997; Page A01

It would be a federal gift of staggering proportions: tax breaks, loan cuts, tuition grants and new scholarships, all designed to ease one of the most difficult chores facing many of the nation's families – paying for college.

To President Clinton, the $50 billion package he will send to Congress this week is a centerpiece of his second term, as vital to his legacy in the White House as balancing the federal budget or reforming welfare.

With public alarm over college costs soaring, and with the economy producing a wave of jobs that demand better-educated workers, Clinton is vowing to provide historic new access to higher education, as the GI Bill did after World War II, or as the federal student-loan program did when it was created in the 1960s. "It will open the doors of college education wider than ever before," the president said last week.

But as they scrutinize the emerging details of Clinton's plan, economists, some congressional leaders and even university officials who want more federal aid say they are worried that the president's proposal is fraught with as many risks as rewards.

What he intends to create, they say, is a massive new government entitlement, one whose roots lie more in election-year politics than prudent fiscal policy, that may hardly have the impact he is promising, and that may be difficult to manage.

Thomas Kane, a Harvard University economist who once worked for Clinton's Council of Economic Advisers, said he fears the package will not achieve one of its fundamental goals: boosting college enrollment. "Most of that money will go to students who would have gone to college anyway," Kane said. "That's tax relief, not education policy."

The core of Clinton's proposal is a tax credit, or Hope Scholarship, that would refund up to $1,500 to families in each of the first two years their child attends college and earns a "B" average or better. Alternatively, families could opt to deduct up to $10,000 from their taxable income for each student enrolled in college. Both tax breaks would gradually be phased out for individuals making between $50,000 and $70,000, and for couples filing jointly between $80,000 and $100,000. The $1,500 tax credit is slightly more than the tuition cost at most community colleges.

The president is also calling for a 25 percent increase in the size of the federal Pell Grants program, which pays the college tuition costs of 3.6 million of the nation's neediest students. Many college officials, even some who contend the package is flawed, say it looms as a potential landmark in American higher education because it could make attending two years of college nearly as universal as attending high school. Currently, about 60 percent of high school graduates nationwide choose to go to college.

"This is a genuinely a breakthrough proposal," said Terry Hartle, a vice president for the American Council on Education, which represents more than 1,300 of the nation's colleges and universities. "It could be a huge step forward for American families."

But already in Congress, and on some campuses, there are doubts about key parts of the plan. Some skeptics question whether it would give colleges powerful new incentives to raise costs even more, pressure professors to boost grades of students desperate to qualify for the new aid, and force the Internal Revenue Service to take the extraordinary step of collecting academic transcripts to make sure tax breaks went only to students with high grades.

Others say they worry that much of Clinton's package slights poor families who, because they pay little in taxes, would not benefit substantially from tax breaks on their children's tuition.

Improving access to college has become a pressing national concern. The gap in earnings between college graduates and workers without a degree is widening, yet the rate at which lower-income families send children to college has remained stubbornly low.

An analysis by economist Thomas Mortenson of the federal government's Current Population Survey shows that among families with annual incomes of more than $67,000, the proportion of graduates from a four-year college has risen sharply, from 30 percent in 1980 to 80 percent today. But the percentage of college-bound youngsters from families with incomes of $22,000 to $67,000 has held steady at around 20 percent, and for the poorest families, the rate continues to hover at less than 10 percent.

Yet if a central goal is to make college affordable for those on the lower rungs of the income ladder, some economists argue, Clinton's plan is an inefficient means of achieving that because so little of the money will end up with the poor.

Just last week, the administration tried to blunt such criticism by shifting several billion dollars it had been planning to spend on Hope Scholarships into Pell Grants. The switch would increase the number of students eligible and raise the maximum grant to $3,000 per student, $300 more than the current limit and the largest increase in 20 years. Even with the increase, however, the grant still would be nearly 30 percent less valuable than in 1980 because of the rising costs of tuition over that period.

To many higher education analysts, the Pell Grant increases are not enough. The Clinton plan "tips the benefits so heavily to the more advantaged in our society that I have great misgivings," said Lawrence Gladieux, executive director for policy analysis at the College Board. "I appreciate that families are struggling [to afford college for their children], but this is clearly an upper-income program. . . . It's a middle-class tax cut. To claim that it's a new GI Bill is extravagant and misleading."

Nationwide, the burden of paying for college is growing. Tuition at public and private universities continues to rise at twice the rate of inflation, and there has been an explosion in student borrowing this decade. Nearly half the nation's students have tuition loans and nearly half also hold jobs. Their debt burden, more than $24 billion, has never been higher. On most campuses, loans have become the dominant form of aid.

Tuition hikes have slowed a bit in recent years, but that has not brought students much relief. At four-year public universities, which enroll the majority of students, annual tuition is now nearing $3,000, costs that typically double when room and board charges are included. In inflation-adjusted terms, that is 33 percent higher than a decade ago.

To many parents, the numbers are overwhelming. "It's scary," said Gerrianne Crenshaw, a federal worker with a daughter in high school in Clinton, Md. "You know a college education is an opportunity your children shouldn't miss – they can't really get a decent job without it – but it's hard to figure out how to pay for it without taking out loans."

That anxiety is what Clinton says he is striving to reduce. As he braces for debate in Congress, he and his aides are insisting that fears of tuition or grade inflation are exaggerated, and that giving the nation's middle class a tax windfall for college education is a wise investment.

"There are still a substantial number of middle-income people who don't believe they can really afford college, and this will help," said Deputy Education Secretary Marshall Smith. "Loans have become a terrible burden for an awful lot of students."

The most provocative part of Clinton's plan – the $1,500 Hope Scholarship – is modeled after a similar initiative created several years ago in Georgia. The program, funded by a state lottery, gives students who graduate from high school with a "B" average or better free tuition and a book allowance at any public university in the state for four years, as long as they keep their grades up. Those who attend private colleges in Georgia receive a $3,000 grant.

Educators say it is having a wide impact. College enrollment in Georgia is surging, and analysts say the program is attracting more lower-income students to seek an education after high school. Tuition has not risen wildly, nor have student grades. Many students lose the scholarship their second year because their grades are too low. Educators also say the size of freshman classes makes it unlikely for professors to know which students most need the new aid.

Still, many doubt that Clinton can duplicate those results on a national scale, in part because his plan is more modest and may not have the allure of Georgia's four-year free ride. Colleges also are wary of incorporating student grades into a financial-aid formula for the first time, in part because their grading systems vary.

"We would prefer that the B average provision not be used," said David Pierce, president of the American Association of Community Colleges. "It will make things very complex to manage. There ought to be some other kind of academic standard."

Many other questions surround Clinton's package, and some have come from the top ranks of his administration. Senior members of his economic team, including Treasury Secretary Robert E. Rubin and National Economic Council Chairman Laura D'Andrea Tyson, objected to the measures last year, according to aides who participated in the debate. Some Republicans in Congress are seizing on that to bolster their critique of Clinton's plan.

In his recent memoir, Dick Morris, Clinton's former political strategist, recalls Rubin complaining that the tax credit was "opening the treasury door to pass out goodies before the election." The book details how Clinton's advisers said tax cuts were a sloppy and inefficient way to boost enrollment because they would squander money on wealthier students bound for college anyway. Rubin does not dispute Morris's account. But he says now that he supports the president's plan.

Using tax cuts for education had irresistible appeal to Morris and other White House aides for one reason: The approach tested brilliantly with voters. In his book, Morris said he found tremendous support for government efforts to expand access to college, but scant voter interest in new federal spending. Championing ideas funded by tax cuts, instead of spending hikes, seemed to be a perfect solution to that problem.

But as Clinton's plan heads to Congress, where it will compete with alternative education proposals from both parties, its fate may lie in whether lawmakers believe it will clear a new path to college for students – whether, in essence, it delivers enough bang for the buck.

"The mythology is that there are vast numbers of deserving people out there who, but for lack of financial resources, would be summa cum laude at Princeton," said former Congressional Budget Office director Robert D. Reischauer. "For some, that may be true. . . . But if the question is whether new tax credits are the way to trigger some huge surge in enrollment rates, the answer is clearly 'No.' "

© Copyright 1997 The Washington Post Company

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