[Congressional Record Volume 142, Number 123 (Tuesday, September 10, 1996)]
[Senate]
[Pages S10206-S10207]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  HIGHER TUITION, MORE GRADE INFLATION

 Mr. SIMON. Mr. President, recently, Lawrence Gladieux and 
Robert Reischauer had an op-ed piece in the Washington Post that is a 
thoughtful and careful analysis of what we ought to be doing in the 
field of education.
  President Clinton deserves praise for being a genuine education 
President. He was a genuine education Governor, as Governor of 
Arkansas, also.
  President Clinton's support of direct lending in the face of strong 
opposition from the banks and the guaranty agencies marks him as no 
flash-in-the-pan gladiator who gives up easily.
  But the wisdom of having any kind of tax cuts at this point in our 
Nation's fiscal history is extremely doubtful.
  If we want to put more money into education, as I do, we can do it 
much

[[Page S10207]]

more wisely and prudently than through the proposals that have been 
announced by the President, popular as they are.
  I ask that the Gladieux and Reischauer item be printed in the Record.
  The material follows:

                       [From the Washington Post]

                  Higher Tuition, More Grade Inflation

           (By Lawrence E. Gladieux and Robert D. Reischauer)

       More than any president since Lyndon Johnson, Bill Clinton 
     has linked his presidency to strengthening and broadening 
     American education. He has argued persuasively that the 
     nation needs to increase its investment in education to spur 
     economic growth, expand opportunity and reduce growing income 
     disparities. He has certainly earned the right to try to make 
     education work for him as an issue in his reelection 
     campaign, and that's clearly what he plans to do.
       Unfortunately, one way the president has chosen to pursue 
     his goals for education is by competing with the GOP on tax 
     cuts. The centerpiece of his education agenda--tax breaks for 
     families paying college tuition--would be bad tax policy and 
     worse education policy. While tuition tax relief may be 
     wildly popular with voters and leave Republicans speechless, 
     it won't achieve the president's worthy objectives for 
     education, won't help those most in need and will create more 
     problems than it solves.
       Under the president's plan, families could choose to deduct 
     up to $10,000 in tuition from their taxable income or take a 
     tax credit (a direct offset against federal income tax) of 
     $1,500 for the first year of undergraduate education or 
     training. The credit would be available for a second year if 
     the student maintains a B average.
       The vast majority of taxpayers who incur tuition expenses--
     joint filers with incomes up to $100,000 and single filers up 
     to $70,000--would be eligible for these tax breaks. But 
     before the nation invests the $43 billion that the 
     administration says this plan will cost over the next six 
     years, the public should demand that policy makers answer 
     these questions:
       Will tuition tax credit and deductions boost postsecondary 
     enrollment? Not significantly. Most of the benefits would go 
     to families of students who would have attended college 
     anyway. For them, it will be a windfall. That won't lift the 
     country's net investment in education or widen opportunities 
     for higher education. For families who don't have quite 
     enough to send their child to college, the tax relief may 
     come too late to make a difference. While those families 
     could adjust their payroll withholding, most won't. Thus any 
     relief would be realized in year-end tax refunds, long after 
     families needed the money to pay the tuition.
       Will they help moderate- and low-income students who have 
     the most difficulty meeting tuition costs? A tax deduction 
     would be of no use to those without taxable income. On the 
     other hand, the proposed $1,500 tax credit--because it would 
     be ``refundable''--would benefit even students and families 
     that owe no taxes. But nearly 4 million low-income students 
     would largely be excluded from the tax credit because they 
     receive Pell Grants which, under the Clinton plan, would be 
     subtracted from their tax-credit eligibility.
       Will the plan lead to greater federal intrusion into higher 
     education? The Internal Revenue Service would have to certify 
     the amount of tuition students actually paid, the size of 
     their Pell Grants and whether they maintained B averages. 
     This could impose complex regulatory burdens on universities 
     and further complicate the tax code. It's no wonder the 
     Treasury Department has long resisted proposals for tuition 
     tax breaks.
       Will the program encourage still higher tuition levels and 
     more grade inflation? While the tuition spiral may be 
     moderating slightly, college price increases have averaged 
     more than twice the rate of inflation during the 1990s. With 
     the vast majority of students receiving tax relief, colleges 
     might have less incentive to hold down their tuition 
     increases. Grades, which have been rising almost as rapidly 
     as tuition, might get an extra boost too if professors 
     hesitate to deny their students the B needed to renew the tax 
     credit.
       If more than $40 billion in new resources really can be 
     found to expand access to higher education, is this the best 
     way to invest it? A far better alternative to tuition tax 
     schemes is need-based student financial aid. The existing aid 
     program, imperfect as they may be, are a much more effective 
     way to equalize educational opportunity and increase 
     enrollment rates. More than $40 billion could go a long way 
     toward restoring the purchasing power of Pell Grants and 
     other proven programs, whose benefits inflation has eroded by 
     as much as 50 percent during the past 15 years. Unlike 
     tuition tax cuts, expanded need-based aid would not drag the 
     IRS into the process of delivering educational benefits. 
     Need-based aid also is less likely to increase inflationary 
     pressure on college prices, because such aid goes to only a 
     portion of the college-going population.
       Economists have long argued that the tax code shouldn't be 
     used if the same objective can be met through a direct-
     expenditure program. Tax incentives for college savings might 
     make sense; parents seem to need more encouragement to put 
     money away for their children's education. But tax relief for 
     current tuition expenditures fails the test.
       Maybe Clinton's tuition tax-relief plan, like the 
     Republican across-the-board tax-cut proposals, can be chalked 
     up to election-year pandering that will be forgotten after 
     November. But oft-repeated campaign themes sometimes make it 
     into the policy stream. That was the case in 1992, when 
     candidate Clinton promised student-loan reform and community 
     service that, as president, he turned into constructive 
     initiatives. If reelected, Clinton again may stick with his 
     campaign mantra. This time, it's tuition tax breaks. This 
     time, he shouldn't.

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