The Clinton administration said yesterday that a congressional bill that would allow high school graduates from the District to pay in-state tuition rates at colleges across the nation should be scaled back to include only universities in this region.

U.S. Education Secretary Richard W. Riley said the White House favors an approach recommended by Sen. James M. Jeffords (R-Vt.) that would restrict the tuition assistance program to public and private universities in Maryland, Virginia and the District. Riley said allowing D.C. students to receive in-state rates and grants at colleges across the nation -- as proposed by Rep. Thomas M. Davis III (R-Va.) and Del. Eleanor Holmes Norton (D-D.C.) -- would be too generous.

"This aspect of the bill would provide D.C. residents with greater benefits than residents of any of the 50 states, and could inadvertently encourage students to leave the D.C. metropolitan area," Riley said in a letter to members of Congress. "Limiting tuition subsidies to qualified D.C. residents attending public institutions in Maryland and Virginia would be more consistent with the options available to residents of any state."

Riley's letter is the latest signal that the Davis-Norton plan -- which passed the House earlier this week -- will have to be scaled back in the Senate. The letter follows a report by the Congressional Budget Office indicating that the House bill could cost the federal government $117 million in fiscal 2000, or $100 million more than the White House set aside for the program in its budget plan.

Support for a D.C. tuition assistance bill remains strong on the Hill, and Davis and Norton said yesterday that they would work with the Senate to lower the program's cost by closing various loopholes in their original plan. One provision in the original bill could have inadvertently permitted thousands of sophomores, juniors and seniors from across the country to receive aid under the program if they attended private colleges in the District for at least a year.

Riley also said the bill needs to be targeted to D.C. students who actually need the proposed $10,000 grants toward tuition at public universities and not to include students from affluent D.C. families that can afford to pay for college themselves. If the $17 million allocated for the program is not enough to meet the needs of all applicants, Riley said, a "priority funding mechanism" of some sort should be established.

"It is critical in this discretionary program to ensure that the very wealthiest D.C. residents do not obtain these benefits from a limited amount of funds at the expense of lower- and middle-income D.C. residents," Riley said.

Unlike their peers in states, D.C. students lack a network of state-supported colleges to attend. Riley said the White House is "extremely pleased" that legislation is proceeding through Congress that would offer D.C. high school graduates an array of new, more affordable ways to attend college.

Riley said the White House supports establishing a flow of new federal funds to the University of the District of Columbia under a program for historically black colleges. While the CBO said the House bill would provide the university with about $40 million next year, Davis said that was substantially more than legislators had in mind, adding that he endorses giving UDC no more than the $1.5 million recommended by Jeffords.

Davis and Norton expressed optimism that the differences would be worked out swiftly so that the legislation could aid students this fall. Norton said she disagrees with Riley's recommendation that the program be restricted to colleges in this region, but would not try to block the bill's final passage over that issue.

"I don't agree that making it nationwide is inconsistent with what other states have," Norton said. "What difference does it make, so long as the students get into a school and there is enough money? The only basis upon which you can honestly draw the limits that way is the availability of funds. . . . If it has to come to that, it has to come to that."

Davis said he is working with senators on ways to tighten the D.C. residency requirements under the bill, a change that would substantially reduce the CBO's cost estimate. He called some of the numbers in the CBO study "grossly exaggerated" and said the CBO "is the referee, and sometimes the umpire makes bad calls."

Davis said that if he had known the details of the CBO's estimate before he pushed the bill through the House, he would have altered the legislation to close the loopholes. But he said the momentum for the legislation remains strong.

"In no way, shape or form does this slow things down," Davis said. "I think the Senate can work this out, and there is no reason we can't get this done before the Fourth of July."

Norton expressed hope that private colleges in Maryland, Virginia and the District could remain a part of the program in the final legislation but said that cost pressures could force them to be dropped.

The House bill would provide high school graduates who live in the District with up to $3,000 annually to attend private colleges in the District, Maryland and Virginia; Jeffords's bill would limit the private colleges to $2,000 in aid per student and restrict eligible schools to those in the District and neighboring counties.

Pat McGuire, president of D.C.-based Trinity College and the leading advocate for a group of private colleges that want to be included in the bill, said city residents would suffer if such schools were excluded. McGuire estimated that if residency requirements in the bill are tightened, about 2,700 D.C. students who attend private colleges initially would be eligible for roughly $8 million in tuition assistance.

"It would be most unfair to deny students who attend the local private colleges, and who really have genuine needs, this very modest support of a $3,000 scholarship per student," McGuire said. "This support supplements, but does not supplant, the very large scholarship programs the private colleges already have."