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Bennett Sends College-Savings Plan to Hill

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WASHINGTON--Secretary of Education William J. Bennett has formally sent to the Congress the Reagan Administration's proposal to allow parents to save for their children's college expenses by earning tax-free interest on U.S. savings bonds.

The main difference between the Administration's plan and S 1817, a bill sponsored by Senator Edward M. Kennedy, Democrat of Massachusetts, is that the former would begin phasing out the tax benefit for families with incomes above $75,000 and would deny it to those with incomes above $80,000.

Senator Kennedy's bill also would begin phasing out the tax break at the $75,000-income level, but would provide benefits to those with incomes as high as $150,000.

House and Senate tax committees reportedly are considering whether to include a college-savings plan in a package of amendments to the 1986 Tax Reform Act. Another likely amendment would reinstate a provision from the old tax code that allowed workers to exclude education benefits provided by their employers from their taxable income.

In related developments:

  • The House Post Office and Civil Service Committee has approved legislation to create a fellowship program that would provide students with up to $100 a month in exchange for their future service in the federal civil service.

The measure--included in a bill that would limit the number of political appointees in the executive branch and increase benefits for career civil servants--is aimed at attracting talented young people to government service.

Recipients would have to serve one year in the government for each year they received aid.

  • The chairman of the House Postsecondary Education Committee has unveiled a plan to reduce the default rate on student loans that is more moderate than a similar proposal by Secretary Bennett.

Under the proposal by Representative Pat Williams, a Montana Democrat, colleges and trade schools with high default rates would not lose federal student aid if they made an effort to correct the problem.

Mr. Bennett has proposed that institutions with default rates of 20 percent or higher be required to lower them within two years or lose the aid.

The Secretary's plan would also deny grants and loans to students without high-school diplomas; under Mr. Williams's plan, such students could receive aid.

And unlike the Secretary's plan, Mr. Williams's proposal would not require lending institutions and loan guarantors to assume a greater risk for defaults.--J.M. & R.R.W.

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