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and fees should be available only when those tuition and fees exceed a percentage of the taxpayer's gross income for any tax year.

As a specific example, and it is an example only, we would suggest a credit be applicable to one-half of those tuition and fees which exceed 5 percent of a taxpayer's annual income and that the maximum. tuition tax credit for any year be $500.

Gentlemen, this is a slight variation on the proposal before you. We have written this to you as an option which should be considered during the preparation of the legislation you are considering. This approach to tuition tax credits would help middle-income taxpayers whose incomes are too high for existing grant subsidies and loans, but for whom college tuitions constitute a severe dislocation of the family budget.

You will recognize the model for this proposal as the existing deduction for medical expenses. We believe that just as medical expenses are sometimes an unusual burden, for which there ought to be a tax credit, there is also a time when educational expenditures may be an abnormal part of the family's expenses, imposing a heavy burden on a family's income.

I will speak now directly from my own personal experience in an institution of higher education. The tuition for colleges in our association this year averages $3,600. Families with incomes of $25,000 to $30,000 a year may think of themselves as financially comfortable until they face such annual tuition bills. The tuition burden can become really severe. Incidentally, Senator Roth, I often have an opportunity to deal with parents rather than statistics about the feeling of the impact of our tuition bills on their family income. I would observe that the experience of many of our parents is one of feeling increasing difficulty in meeting costs, whatever the national statistics may be about their available or disposable income.

I hear that complaint more frequently each year, but as educators we are particularly proud that many families are still willing to make such sacrifices to educate their children. We are aware of the burdens they are bearing. It is appropriate for families to invest in their children's education, their children's future, by paying for a college education. It is also appropriate that families for whom this investment constitutes an unusual burden should have some help.

Tax credits should be income contingent and bear a relationship to a family's level of effort. Some examples might be helpful, showing how a tax credit of up to $500 for those tuitions and fees exceeding 5 percent of the family's gross income would work in practice. Under our suggested plans a family whose income was $20,000 with one child attending a public university outside their own State would receive a tax credit of about $250.

The average public institution tuition across the country is $1.519 this year. A family with an income of $25,000 living in Michigan and sending two children to Wayne State University in Detroit, where I taught for a good many years, would be entitled to a tax credit of $370. Wayne State tuition fees are $977 this year.

A family with an income of $30,000 sending a child to one of the independent colleges in our association would be eligible for a $500 tax credit to help them with $3,600 in tuition and fees.

Even a family with an income of $57,500 sending a child to one of our GLCA colleges could receive a tax credit of $360. Under our suggested formula, the forgone tax revenues would be significantly different than they would under some of the proposals you have considered. We estimate, and we do not have as good a source for estimating this as you do, but we estimate it would be approximately $1 billion annually in foregone tax revenues.

In contrast to other proposals, it would all go to help families already making a significant investment for a substantial part of their income in the education of their children.

If the Congress is willing to provide substantial additional money for student aid for higher education, we believe that a stronger case can be made for putting those additional resources directly to the existing student aid programs. The main problem with those programs now is that their funding levels do not allow them to be fully effective, particularly for middle-income families.

However, we recognize that there are political and administrative arguments which favor providing further aid through tax credits rather than through direct grants. In that case, we urge very strongly that the Congress not abandon the basic principle that Federal student assistance should be related to need.

We believe our proposal, which would make a tax credit available for those tuition and fees exceeding a percentage of the family's gross income, represents a tuition tax credit formula which is compatible to that important principle. Thank you very much.

Senator PACKWOOD. Doctor, I will emphasize again that on behalf of all of us we have no intention of backing away or eliminating the present student financial aid programs. Your statement indicates again the value of these hearings. I think all of us spent hours and hours drafting the bills, but you have thought of a number of suggestions we never thought of, and they are good suggestions.

For anyone who thinks that hearings are a sham, to make a record and to say, let's go ahead with what we had planned, this is good evidence that that is not so. The administration was here. The Department of the Treasury particularly opposes tuition grants, because they say it is more complex to administer tuition tax credits than the present student aid, 'BEOG's and other types of programs.

Would you address yourself to the relative complexity of the two? Mr. WALLIN. It is hard for me to imagine programs more complex to administer than the one you have just described. The BEOG program.

Senator PACKWOOD. Could you give some experience you have had at the school with the BEOG program?

Mr. WALLIN. We are appreciative that Congressman Sharp from our district last year was able to help Earlham College specifically obtain loan funds which were being held in the Office of HEW. We believe the funds were held up over various bureaucratic irregularities. Only after going through our Congressman and getting our Congressman to intervene did we finally receive the loan funds on time. We had to pay $5,000 or $6,000 in interest payments because we were at that time borrowing money for our operations in the summertime. The Federal Government was not paying us what they owed us.

Senator PACKWOOD. In the last analysis, they considered they owed it, and finally paid you, but it did you no good until you went to your Congressman?

Mr. WALLIN. That is right. We had great difficulty finding out where the person was who was supposed to be answering our mail. Indeed, we have never really found him.

[General laughter.]

Mr. FULLER. Senator, I might add one comment to that I spent 3 years in "The Thing" as an assistant to the first Assistant Secretary of Education, Dr. Marland. I recall an experience at that time when a college came to us with a problem about their allocation for student aid money. It was my job to look into the matter on behalf of the Assistant Secretary. What we found was that the college had made its plans thinking that its past allocations somehow reflected a formula the Federal Government was using and they planned accordingly. They were very shocked when they came in to find that their allocation for next year was lower than the previous year, even though their need was greater.

What we found was that there was no formula at all. HEW staff were simply taking the money, and dividing it up according to who was asking first. I don't think they have made very many changes in that process. They have tried, but it is a terribly complex matter to try to get that machinery over there to work.

Senator MOYNIHAN. Mr. Chairman, I feel obligated to warn the witness that persons who reveal the secrets of "The Thing" have been known to disappear in this country.

[General laughter.]

Senator PACKWOOD. Senator Roth?

Senator ROTH. I can assure you gentleman that I am very much interested in your proposal and will make a careful study of it. I thought that your testimony about the perceptions of the middle-income family are very true. I have had people come in my office literally in tears who were working hard to try to send their children to school, and their children were working as well and they are just finding the burden too much.

So, I don't think there is any question about need in this area, and as the chairman has pointed out, your testimony has some very excellent suggestions and I assure you we will take a careful look at them. Mr. WALLIN. Thank you very much.

Senator MOYNIHAN. I would like to note that you have proposed an approach which Senator Ribicoff has found attractive, and it is a variation on the theme and none of us are committed to all the particulars of our formula. We are committed to the idea, however and we will listen to suggestions very carefully. There is a case to be made, and we are, as the chairman said, trying to hear of the alternatives, and it is always possible we will devise a program which gives options to the persons involved, and we could maximize our interests there.

Could I ask, what did you teach at Wayne State?

Mr. WALLIN. I am a French historian, sir.

Senator MOYNIHAN. A French historian. Then I offer you a line of la Roche Faucault who said that, "Centralization produces hysteria at the center and anemia at the extremities," and that is what we are trying to get rid of.

[General Laughter.]

Mr. WALLIN. Thank you.

Senator PACKWOOD. Gentlemen, thank you.

[The prepared statement of Dr. Wallin follows:]

STATEMENT OF DR. FRANKLIN W. WALLIN, PRESIDENT, EARLHAM COLLEGE, ON BEHALF OF THE GREAT LAKES COLLEGES ASSOCIATION

Mr. Chairman and Members of the Committee, thank you for the opportunity to testify during these hearings when you are considering proposals for tuition tax credits. I appear here representing the collective position of the twelve member colleges of the Great Lakes Colleges Association.1

The cost of a college education constitutes a significant burden for many American families and students. The combination of Federal, State and institutional scholarships and loans has kept college education within the reach of many talented young people from lower income families, but existing student aid programs do not significantly help middle income families who find college tuition bills a serious strain on their family budgets.

We believe that there is a need for further assistance with these education costs. We also believe that the guiding principle of Federal student assistance programs, relating the level of assistance to the level of need, should be maintained. Because existing Federal student aid programs are designed specifically to carry out this principle, we would prefer that additional assistance come through substantially increased appropriations for these programs. However, we realize that many Members of Congress prefer tuition tax credits as the means for providing any substantial new help for education costs. Tax credits are attractive because of their administrative simplicity. No additional employees would be required at HEW, no significant part of the aid would be absorbed by administrative costs, and they directly recognize the family's contribution to their children's education.

To preserve the principle of relating aid to need, we believe that tax credits for tuition and fees should be available only when those exceed a percentage of a taxpayer's gross income for any tax year. As a specific example, we suggest that a credit be applicable to one-half of those tuition and fees which exceed five percent of a taxpayer's annual income, and that the maximum tuition tax credit for any year be $500.

This approach to tuition tax credits would help middle income taxpayers whose incomes are too high for existing grants and subsidized loans, but for whom college tuitions constitute a severe dislocation of their family budget. The model for this proposal is the existing deduction for medical expenses. Some medical expenses are considered a part of normal living expenses, and tax relief is offered only when they constitute an unusual burden for any given year. Likewise we believe that educational expenditures are a normal part of living, but they, too, may impose a real financial burden.

This year, tuition and fees at the colleges of our Association average $3,600. Families with incomes of $25,000 or $30,000 a year may think of themselves as financially comfortable until they face such annual tuition bills. It is not unusual for a family to have more than one child in college at the same time. Then the tuition burden becomes really severe. Such families may receive some help from institutional funds, primarily loans, but they still must make serious sacrifices for their children's education.

As educators, we are proud that so many families still are willing to make such sacrifices to educate their children, but we are also aware that the burdens are substantial and growing. Many families are frustrated, because they have too much money to qualify for student assistance, but not enough to pay the cost of education at the college of their choice.

It is appropriate for families to invest in their children's future by paying for their college educations. It is also appropriate that families for whom this investment constitutes an unusual burden should have some help.

1 The Great Lakes Colleges Association members are: Albion College, Albion, Mich. ; Antioch University, Yellow Springs, Ohio; Denison University, Granville, Ohio; DePauw University, Greencastle, Ind. Earlham College, Richmond. Ind.; Hope College, Holland, Mich. Kalamazoo College, Kalamazoo, Mich.; Kenyon College, Gambier, Ohio; Oberlin College, Oberlin, Ohio: Ohio Wesleyan University, Delaware, Ohio; Wabash College, Crawfordsville, Ind. ; The College of Wooster, Wooster, Ohio.

Let me offer a few examples of how our suggestion for a tax credit of up to $500 for those tuition and fees exceeding five percent of a family's gross income would work in practice. A family whose income was $20,000, with one child attending a public university outside their own state would receive a tax credit of $250 (average out-of-state tuitions across the country are $1,519 this year). A family with an income of $25,000, living in Michigan and sending two children to Wayne State University in Detroit (where I taught for many years), would be entitled to a tax credit of $375 (Wayne State tuition and fees are $977 this year). A family with an income of $30,000, sending a child to one of the independent colleges in our Association-ideally to Earlham-would be eligible for a $500 tax credit to help them with the $3,600 in tuition and fees. Even a family with an income of $57,500, sending a child to one of our GLCA colleges could receive a tax credit of $300. Under our suggested formula, the foregone tax revenues would be approximately one billion dollars annually. In contrast to other proposals, it would all go to help families already investing a substantial part of their incomes in the education of their children.

If the Congress is willing to provide substantial additional money for student aid for higher education, we believe that a stronger case can be made for putting those additional resources directly into the existing Federal student aid programs. The main problem with those programs now is that their funding levels do not allow them to be fully effective, particularly for middle income families. However, we recognize that there are political and administrative arguments which favor providing further aid through tax credits rather than direct grants. In that case, we urge very strongly that the Congress not abandon the basic principle that Federal student assistance should be related to need. We believe that our proposal, which would make a tax credit available for those tuition and fees which exceed a percentage of a family's gross income, represents a tuition tax credit formula which is compatible with that important principle.

Senator PACKWOOD. Next, as I indicated, we will take Dr. Lubbers, representing the Grand Valley State Colleges.

STATEMENT OF AREND LUBBERS, PRESIDENT, GRAND VALLEY STATE COLLEGES, ON BEHALF OF THE AMERICAN ASSOCIATION OF STATE COLLEGES AND UNIVERSITIES

Mr. LUBBERS. Good morning, Mr. Chairman.

I believe I was selected for this task because I am a father of one son who graduated from a public institution and is now enrolled in graduate studies in a private one. I have a second son who is enrolled in a public institution, and a daughter who is enrolled in a private institution. When Secretary Califano was quoted in one of our provincial newspapers as saying this was an idea only for the wealthy, I wondered who he considered wealthy.

Senator MOYNIHAN. It made you feel good, did it not?
Mr. LUBBERS. I really feel rich.

[General laughter.]

Mr. LUBBERS. Another thing that has struck me as I have been listening for the last hour to the testimony, my colleagues from the private sector have been putting forward their case, and I represent the public sector, 80 percent of the students in higher education, and although I do not concur with all of the formula, I think perhaps we have an issue here in which the private and public sectors can come together, and I think as formula finally is worked out, I am hopeful we can find one that both sectors can support with great enthusiasm.

I think it is possible. The idea has been in back for some time. Now that I think it is an idea, perhaps its time has now come, and I think we in higher education appreciate the fact that you are pushing hard

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