Analysts Envision a 'Creative Period' Ahead for College Financial-Aid Plans

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Washington--With college costs escalating rapidly and federal assistance unlikely to keep pace, the nation is in the midst of a "creative period" of developing alternative ways to finance higher education, experts said at a conference here last week.

"A great deal is happening very quickly," Terry W. Hartle, chief education aide to the U.S. Senate Committee on Labor and Human Resources, told the meeting of educators and financing experts.

The trend, he said, "reflects a growing concern that we must find new ways to help students meet college bills."

Growth in innovative financing programs is likely to continue, others predicted, because the deficit-ridden federal government probably will lack the resources to increase financial-aid programs significantly.

"Our new 'education President' notwithstanding, the odds are slim there will be major changes in the federal financial-aid role because of the deficit," said Janet Hansen of the College Board's Washington office.

The conference, "Changing Roles and Responsibilities in Financing Higher Education," was sponsored by the State University of New York at Albany and held at the Brookings Institution here.

A Flurry of Schemes

The conference studied an assortment of financing schemes, including:

Tuition-prepayment plans.

Many states have slowed development of such plans as they await results of initiatives adopted by Michigan and eight other states, participants said. Such programs allow parents to cover their children's tuition at public colleges and universities in the state by making a lump-sum payment years in advance.

Participants noted with interest the recent experience of the Michigan Education Trust, the first state prepayment program. As of the deadline late last month, only about a third of the 82,000 families that applied for the program actually sent in their payments, which start at $6,800 to guarantee an infant4four years of tuition at age 18.

Many of those who did pay apparently had borrowed money to do so.

Rulings by the Internal Revenue Service on the Michigan plan have also been a factor in delaying other states from considering the option. The irs has ruled that students must pay taxes on the difference between the value of their eventual tuition and the original cost of the contract, and that income from the trust itself may be taxable.

At the conference, Richard E. Anderson of the National Center on Postsecondary Governance and Finance called for a national prepayment plan, to be administered by a nonprofit trust. Families would purchase tuition certificates entitling them to a certain number of semester credits for their children.

"A well-conceived fund could be investing hundreds of millions, perhaps billions, of dollars," he said.

National savings plans.

Theodore L. Bracken of the Consortium on Financing Higher Education called for a national college-savings plan built on a newly approved method of educational financing using U.S. Savings Bonds.

The Congress agreed this year to make interest on savings bonds tax-exempt for families with incomes below $60,000, if the earnings are used to meet college costs.

A private trust corporation could be a sales arm for the bonds, provide information about college-financing alternatives, and promote local initiatives, Mr. Bracken said.

Guaranteed access.

Eugene M. Lang, the New York philanthropist, and his "I Have a Dream" foundation have captured the attention of many of the college-financing experts at the conference.

In 1981, Mr. Lang promised members of a New York City elementary-school class that he would pay their college tuition if they graduated from high school. Most of the more than 60 children graduated and more than half are now in college, said Robert H. Koff, dean of the School of Education at suny-Albany.

Other sponsors have set up similar programs that are now serving 5,000 at-risk youths, Mr. Koff said. "Yet, 'I Have a Dream' programs, as effective as they appear to be, cannot meet the needs of all of the students who require assistance," he argued.

Collaboration among federal, state, and local education officials, he maintained, is needed to expand succesful small programs to help more at-risk youths aspire to college.

Conference participants pointed to New York's new Liberty Scholarships, which will provide low-income students who finish high school and are admitted to a college or university in the state the difference between their educational costs and the grants they receive from other federal and state programs.

Such initiatives send a message to young people "that higher education is not only possible, it is their right, and that we want to help,'' said Peter J. Keitel, executive vice president of the New York State Higher Education Services Corporation.

Community Service.

Interest is increasing in programs linking college aid to community service, said Kathryn Mohrman of the University of Maryland and Susan Stroud of Brown University.

Many institutions have begun to tie aid to service. The University of California at Berkeley, for example, offers loan forgiveness to students participating in approved projects.

Ms. Mohrman and Ms. Stroud criticized, however, a proposal by the Democratic Leadership Council, an organization of moderate Democratic politicians. The group has called for creation of a "citizens' corps," in which young people would serve for up to two years, either in a military or civilian capacity, in exchange for educational vouchers. Over time, the program would replace existing federal financial aid by making service a requirement for educational assistance.

"The dlc proposal is probably a very bad deal," said Ms. Stroud. "It moves away from the national consensus established on financial aid."

Instead, she and Ms. Mohrman endorsed legislation proposed by Senator Claiborne Pell of Rhode Island. The measure would provide educational benefits to young people who served their country, but without eliminating current aid programs.

Vol. 08, Issue 15

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