INDIANAPOLIS, JULY 28 -- Vice President Bush, taking a rare step toward defining a distinct position for himself on a sensitive issue, education, today called for the creation of college savings bonds and the expansion of student loan programs to help families pay escalating college costs.

"The college savings bond would work just as the U.S. Savings Bonds do now, except their income would be tax-free if applied to college tuition," the vice president said in a speech to the National Conference of State Legislators.

Under the Bush plan, parents would have a regular amount -- he suggested $25 a month for those wanting their children to attend public colleges and $140 a month for those wanting private schools -- deducted from their paychecks.

The bonds would not be cashed in until a child enrolled in college. At that time the federal government would pay the college the principal and accumulated interest. If a child decided not to go to college, the interest would become taxable.

The idea is to help families finance college by encouraging them to save. Bush said he realizes that many families "lack the ability to save any amount at all." For those, he called for continuation of college work-study programs and grants in aid and for expanding student loan programs.

Bush said he believes college should be financed by parents' savings, work and student aid during college and by loans to be paid off after graduation. "What's missing from this part is savings," he said. "Too few Americans are saving for their children's education."

Legislators in several states, including Indiana, have adopted programs similar to Bush's proposal. The vice president also indicated that he considers "interesting" several other ideas, including tuition prepayment plans and interest-free college savings accounts, modeled after Individual Retirement Accounts. Bush also favors spreading out loan repayments so students don't have to pay large amounts during their first years of work, when salaries are typically low.

The Reagan administration has been criticized for cutting student loan funds and aid for the disadvantaged. In the speech, Bush distanced himself from these policies without directly criticizing the president. "Good education is good policy, and it is good politics," he said.

Bush said he favored "more assistance for the disadvantaged" in preschool Headstart programs and remedial reading programs. He also urged that every high school senior be taught to use a computer. He suggested that special schools be set up for "exceptional students" in math and science.

At the same time, Bush embraced much of the back-to-basics agenda supported by the Reagan administration. He said he favors competency tests for teachers, more homework for students and the teaching of values in the classroom. "We should teach our children what I call the four R's -- reading, writing, arithmetic and respect," he said.