the adoption of another tax expenditure would only add complexity to the labyrinth of federal expenditures for education and would further split program responsibility across agencies... There is a further technical difficulty . . . the problem of enforcement. The IRS should not be in a position of policing educational institutions to determine if their courses meet the necessary requirements for the credits."

5. Part-time students under some of the bills would be ineligible

Under the Roth or Anderson tax credit one must be a full-time student to be eligible. According to CBO, in 1976 almost 39 percent of total degree-credit enrollment were part-time students. Their numbers have been increasing and are likely to continue to do so. These students, if they are at least half-time, are eligible for OE grants and other programs. They would not be aided at all under the Roth or Anderson tax credits. An expansion of existing student aid programs to include middle-income persons would be beneficial to these parttime students. It is true however, that the Packwood/Moynihan bill does in. clude part-time students.

EXPAND EXISTING STUDENT AID PROGRAMS

We believe that $1 to $1.5 billion in additional appropriations are necessary to expand the OE student assistance programs to adequately meet the needs of middle-income students, while at the same time increasing aid somewhat to the lower-income persons currently receiving awards, and removing inequities affecting independent students. We applaud the Administration (something we haven't done too often in the past) for favoring this type of approach. At a budget briefing on Jan. 21, Secretary Califano and Commissioner Boyer pointed out that $700 million is earmarked in the President's fiscal year 1979 budget request as part of a $3 billion contingency fund to expand aid to the middle. incomes. We are also happy to see that Senator Pell will be introducing legislation to this effect in the Senate, and that Rep. Bill Ford plans to do so in the House.

I realize that this committee does not have jurisdiction over these programs, but I do want to set forth for the record some changes that could be made in the programs which we favor. Many of these changes, which we have been discussing with OE and HEW, do not require any statutory changes.

a. Basic educational opportunity grants—BEOG

The administration has already recommended full funding of the program at the $1,800 maximum award level, and a liberalization of the expected family contribution schedule, by raising the asset reserves from $17,500 for personal assets to $25,000 and from $25,000 to $50,000 for farm and business assets. Both of these changes will prove beneficial to middle-income families. Other changes that we think should be considered include:

1. Further increasing the maximum award.-One high-level OE official estimates that it would require a maximum grant of $2,200 to keep pace with inflation. We support such an increase. To ensure that inflation does not eat away at the value of awards in the future, the maximum award should be tied to an inflation index relating to the cost of college. President Carter, while still a candidate, in an interview with the National Student Lobby stated that he was "in favor of the inflation index." This would require a statutory change.

2. Reduce the tax rate on discretionary income.-These tax rates are applied against discretionary income to determine the family contribution. Currently they are 20 percent for the first $5,000 of discretionary income, and 30 percent for income above that. These could be reduced to 15 percent and 20 percent. Reducing the rate for the first $5,000 would benefit everyone with net taxable income above the family size offsets (see below), while reducing the higher rate, would benefit those over $11.000 net taxable incomes.

3. Increase the family size offsets.-These offsets, which are intended to provide for basic subsistence expenses which must be met before any contribution can be expected toward a student's educational expenses, are deducted from net taxable income. For 1977-78 the offset for a family of four will be $6,250. These offsets were originally based on the Social Security Low Income Thresholds for 1971 and have been increased each year by the CPI percentage increase. These offsets could be increased to match the medium level income, rather than the low-income threshold. This would benefit all those above the current cutoffs.

4. Improve the treatment of independent students.-Particular changes that needs to be made here are increasing the offset for single independents (only about

$1,100 in 1978), lowering the tax rates on discretionary income particularly for those independents with their own dependents, and using the same asset treatment for the independents with their own dependents as is used for dependents. Many of these students are older, and do not fit the description of the child from a "rich" family taking advantage of the system. In fact, approximately 70 percent of those who are independent are over 23 years of age.

5. Remove the half-cost limitation.-This does not really relate to the middleincome issue, but nonetheless, we believe this arbitrary rationing device, which was described earlier, should be repealed. This requires Congressional action, and while it might not be dealt with at this particular time, it certainly needs to be addressed during next year's reauthorization of the Higher Education Act.

This combination of changes would provide award to families of at least $25,000 gross income, and probably would be closer to $30,000.

b. Supplemental educational opportunity grants—SEOG

1. Increase the appropriation to at least $400 million from the current level of $270 million. The recommended funding level from the O.E. regional review panels has far exceeded the actual appropriation. For fiscal year 1977, data from OE shows that the recommended level was almost $600 million. Besides generally needing more funds, another problem is the distribution of those funds. Appropriations are divided into Initial Year awards, and Continuing year awards, with approximately half the money going for each award. This results in a shortfall of funds for upper-division students, since there is not enough available to ensure that every recipient continues to receive a grant. So, for the increase to $400 million, about 260,000 new awards could be granted if the average award remained the same.

2. Change the requirement that to be eligible the expected family contribution cannot exceed more than 50 percent of the cost of education. This could be raised to say 60 percent or higher, and would particularly benefit middle-income families, if sufficient appropriations are available.

c. College work study-CWS

1. Fully fund at the maximum level of $600 million.

2. Repeal the provision that allows payment of subminimum wages.

d. State student incentive grants-SSIG

1. Increase the appropriation from $63.75 million to at least $113.7 million. This will result in an increase in the number of awards of about 200,000. SSIG, of the three grant programs, currently reaches more middle-income families that do BEOG or SEOG.

e. Loans

1. Increase the income ceiling for eligibility for a subsidized Guaranteed Student Loan, from the current level of $25,000 adjusted family income ($31,000 gross income), to $40,000. If a student has income below this level the Federal Government pays the interest charges while the student is enrolled in college, and for the first nine months after graduation. By increasing the income ceiling to $40,000 virtually all students would become eligible for the interest subsidy. We believe that loans should be the last resort of students seeking financial assistance, and that students should not be forced to take out unrealistic levels of loans. However, particulary for higher-income people who desire or need such loans, they should be easily available.

2. Increase the appropriation for National Direct Student Loans to $350 million. This would expand the number of loans available under this low-interest program.

Mr. Chairman, NSL and NSA believe that a package such as this, if carefully considered will prove a far superior method of aiding middle-income students than tax credits.

SPECIFIC SUGGESTIONS REGARDING TAX CREDITS

As stated earlier, if the Congress does insist on enacting a tuition tax credit, we believe there are certain specific provision which must be included if such a credit is to prove at all worthwhile. Such suggestions from NSA & NSL include those set forth briefly here:

1. A refund provision, such as that in the Packwood/Moynihan bill. Without such provision, the income distribution is completely inequitable and would exclude all low-income people.

2. A progressive reduction above a certain income level. This would ensure that higher income individuals who are not as financially pressed as lower- and middle-income families, receive lower amounts of aid. Such a reduction could start at $25,000 and reduce the credit by 2% of adjusted gross income in excess of this level, thereby phasing out a $500 credit at $50,000 income. Senator Holling's bill contains a reduction factor.

3. Inclusion of part-time students for the reason stated earlier.

4. Inclusion of graduate and professional students.

5. Inclusion of living expenses. These are just as much of a financial burden to students and their families as are tuition and fees. All existing OE student aid programs take into account living expenses such as room, board, books, etc. in determination of awards. In fact while tuition charges vary greatly from state to state and between public and private institutions, non-instructional costs are far more uniform.

6. The credit should not be reduced by the amount of student aid received. Particularly if only tuition expenses are covered and funds received from other student assistance programs are subtracted from the expenses, then low-income people will be cut out from receiving the credit.

In closing, I hope that the Committee will seriously consider the issues that I have raised. We have no quarrel over goals, only over the method to achieve those goals. It is gratifying that the Congress and the Administration both finally recognize the plight of millions of persons in their struggle to attend college, and are formulating various proposals to provide financial relief. I urge this committee to support the student aid alternative rather than the tuition tax credit. EDUCATION PARTICIPATION RATES OF DEPENDENT STUDENTS BY FAMILY INCOME AND CONTROL OF

1 Of those people 18 to 24 years old who were high school graduates, 43.7 percent were enrolled on a full-time basis in college.

Note: Calculations are based on all dependent family members aged 18 to 24 years minus those enrolled below college, those who have completed 4 or more years of college, and those who are high school dropouts.

Sources: Policy Analysis Service, American Council on Education based on U.S. Bureau of the Census data.

TABLE 3-PERCENT OF 18- TO 24-YEAR-OLD DEPENDENT FAMILY MEMBERS
COLLEGE, BY FAMILY INCOME,2 OCTOBER 1967-OCTOBER 1976

ENROLLED IN

1 A dependent family member is a relative of the primary family head other than the wife. 2 Family income in 1976 dollars, civilian noninstitutional population.

Source: CBO calculations based on data supplied by the Census Bureau,

APPENDIX 8

Senator HARRY BYRD,

Senate Finance Committee,

PARENTS ASSSOCIATION OF P. S. 173, QUEENS.
Flushing, N.Y., January 22, 1978.

Dirksen Senate Office Building, Washington, D.C.

DEAR SENATOR BYRD: I am writing to you on behalf of Presidents Council of School District 26, Queens, New York. We are an organization of presidents of Parents Associations of all the public schools in our district, whose total enrollment is 14,000 children.

As parents whose commitment is to quality public education we object to the proposed Pack wood-Moynihan bill. It is a threat to every American's constitutionally guaranteed right to freedom of religion, a menace to the American system of free, public education, and an outrageously expensive burden on an already overburdened tax-paying public.

The first amendment to the Constitution says, "Congress shall make no law respecting an establishment of religion . . .". In 1971 that injunction to Congress seemed to be stated clearly enough for all to understand, but time seems to have blurred its meaning for some. That meaning is, quite clearly, that government is in no way to support institutions of religious education. Our country has developed this cardinal rule out of the bitter experience of the earliest refugees to these shores. Members of many different sects found themselves together, and with the great good sense that has come to characterize the American people, came to the conclusion that freedom for any one religious group was dependent on freedom for all groups. The beauty of the first amendment is that although the religious makeup of our population has changed, and will continue to change, our country continues to absorb new sects peacefully. Our government has neither patronized, nor persecuted, any religious group; and through this policy of "benign neglect", has created a climate in which all our citizens are free to follow their conscience. Considering how many of us there are, and how many different beliefs we have, we have lived in amazing peace and harmony with one another.

To meddle with this simple rule which ensures each of us freedom of conscience is to begin to pick away at the foundation of national tranquility and stir up and inflame sectarian rivalries.

Recent Supreme Court rulings have interpreted the Constitution to mean that direct aid to pupils enrolled in a sectarian school can be permitted. The present bill proposes to decrease the taxation of families sending their children to tuitioncharging, non-public schools, including sectarian or religious schools. . . . There is no direct connection between the financial aid given and a benefit to an individual child. There are no guarantees that increased tuitions might not immediately swallow up any monetary gain a family might accrue. The only recipients of benefits from these tax credits would be the private schools, the vast majority of them sectarian in nature. By relieving a particular religious group and its members from part of the obligation of supporting its affiliated religious school, more money will be available to support sectarian activities. There is no way of directing any of the monetary benefits from the proposed tax credit to a child solely for the welfare of that child.

What then, does this bill propose to accomplish? Its supporters would have us believe that it endeavors to aid families in their efforts to educate their children. Only the hypothetical man from Mars, called upon so often to see our society with fresh eyes, might see this as an unmitigated good. If however, we informed the mythical visitor that there were at present fifty different state systems of education, providing at no cost, an education for every child within its boundries, he might then wonder why some citizens felt they were entitled to aid when they chose not to use what was free to all.

The Packwood-Moynihan bill is an attack on public education in the United States. It provides rewards and incentive to parents who abandon use of the public schools for use of private schools, and encourages citizens to lose interest in the maintenance and betterment of the public schools. The American public schools are a unique institution developed in response to the needs of a democracy for an educated citizenry. These systems of public education conscientiously refrain from indoctrination of pupils in any religious belief. This is done in order to preserve the rights of the individual to practice his religion as he wishes, and to direct the religious education of his children as he sees fit. It reserves to the citizen the choice between an education which is secular, that is, promulgates no teachings of religion, and an education which indoctrinates the child in a particular faith. Each of us has this right guaranteed to us by the Constitution. Rights, however, carry with them, implied responsibilities. Government provides the