Federal Panel Urges Congress To Revamp Financial-Aid System and Allow Service

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WASHINGTON--A Congressionally chartered panel last week urged the federal government to revamp its college financial-aid efforts and guarantee all students a fixed amount of aid as a way of recapturing its commitment to helping students pursue higher education.

The bipartisan, nine-member National Commission on Responsibilities for Financing Postsecondary Education also backed the idea of letting students repay their debts by performing community service after graduation, an approach that President Clinton touted in his campaign last year.

The federal commission's report also endorsed direct federal lending to students, income-contingent loan repayment, and helping families prepare for college expenses while their children are still young--ideas that were included when Congress reauthorized the Higher Education Act last year.

Although the report, "Making College Affordable Again,'' was received warmly by influential members of Congress, its impact may be tempered by its price tag and the fact that it comes on the heels of the extension of the H.E.A. through fiscal 1997.

Among other costs, a proposal in the report to reconfigure the Pell Grant program--budgeted at $6 billion for the current fiscal year--would cost the federal government an additional $6.5 billion a year.

"This final report of the commission represents a bold and compelling document that could help to shape federal policy on financing higher education,'' said Sen. James M. Jeffords, R-Vt., at a news conference to announce the report's release.

Mr. Jeffords, who sponsored the bill that created the panel of business, education, and civic leaders, was joined by seven other lawmakers representing both houses of Congress and both political parties.

In a statement, Secretary of Education Richard W. Riley said he was pleased that the "bipartisan commission agrees with many of the Clinton Administration proposals. ... We are interested in the views of the commission and will study its recommendations carefully in formulating our policies on postsecondary education.''

Federal Role Emphasized

The 80-page report is the product of two years of work that included regional hearings and seminars, a national symposium, and research conducted at the University of Vermont and the University of California at Los Angeles.

Although the panel was instructed to address the roles of states, institutions, families, businesses, and philanthropies in financing higher education, it focused almost exclusively on the federal government.

"Our thrust is to get the federal government back to its level of responsibility, on the one hand, and to help families plan for the future,'' said William Cotter, a commission member and the president of Colby College in Waterville, Me.

"We know there are very good reasons that costs have risen in different sectors,'' Mr. Cotter said. "Each state and institution has to work these issues out for themselves. And we agreed that the marketplace works.''

The STEP Concept

A new concept called the Student's Total Education Package, or STEP, is at the heart of the commission's proposal.

Under the plan, full-time undergraduates would qualify for various combinations of grants, loans, and work-study aid that could add up to, but not exceed, the nationwide average per-student expenditure at public and private four-year institutions. This figure, which the panel estimated would be $14,000 in the current school year, would change from year to year.

Grants and work-study jobs would be targeted to students from families with annual incomes of $40,000 or less, and subsidized loans--those on which the government pays interest while the lender is in school--would be available to students with family incomes of as much as $100,000.

As family income rises, so too would the share of the financial-aid package consisting of loans that have no interest subsidy.

Using a family of four as an example, the commission said that students from families that have no income would be eligible for a $4,000 grant (an amount the panel said was equal to 75 percent of the current average cost at public, four-year colleges), $4,000 in work-study aid, and $6,000 in subsidized loans.

Students from families earning $30,000 a year would be eligible for a $2,000 grant, and another $12,000 divided among subsidized loans, work-study, and unsubsidized loans.

Grant aid would end as family income surpassed $50,000, and work-study aid as it surpassed $70,000. Finally, at income levels above $100,000, the entire aid package would be composed of unsubsidized loans.

Commission members said their proposal would give students a greater choice of schools and would return to the the federal government more responsibility for paying college costs.

The report points out that in 1975, the federal government picked up 24 percent of the cost of attending college while families and students assumed 39 percent of the cost. By 1990, the federal share had dropped to 11 percent, while that of families and students had risen to 49 percent.

Other Recommendations

The commission also recommended:

  • That Congress adopt federal tax incentives to encourage families to save for college. Suggestions included penalty-free withdrawls from Individual Retirement Accounts; allowing all families, regardless of income, to use Series EE U.S. Savings Bonds to shelter college savings from taxation; restoring the deductibility of interest on college loans from income taxes; and ending the taxation of scholarships.
  • That states establish an "accountability process that emphasizes strategic planning and mutual responsibility among financing-system participants.''
  • That states consider the adoption of "high-tuition, high-aid'' strategies, under which states would end their typically high subsidies of public colleges and universities and use the savings to provide more aid to the poorest students. The commission noted, however, that this approach could lead to "the prospect of high tuition, low aid'' systems given current budget difficulties.

Vol. 12, Issue 20

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