President Clinton's proposal to offer relief to middle class taxpayers with children in college sounded like the best news private colleges have heard in a long time, but the plan has been met largely with hesitance rather than hurrahs.
That's because, like a child straining to hear the kerplunk of a stone dropped down a well, campus officials are awaiting the upshot. And they are not certain they will like it.
In a televised December address, President Clinton told the nation that families could deduct up to $10,000 in tuition and fees from their annual taxable income. The instant analysis: The plan should help pricey private colleges and middle-class families.
And yet. . . .
"You don't want to look a gift-horse in the mouth. Anything that puts money into the hands of families for tuition purposes only sounds good to me," said Robert H. Chambers, president of Western Maryland College in Westminster. "But a fear I have is that something could be done with one hand and taken away with another," he said.
"It's sort of a glass half full, a glass half empty," Reginald Wilson, senior scholar at the American Council on Education, said of the president's proposal. "We recognize that the deduction for children going to school is a positive sign. We also understand that the savings have to come from somewhere else."
That somewhere else, Dr. Wilson, Dr. Chambers and other campus officials said, may be the grant and loan programs that aid families at the lower end of the economic spectrum.
But David Longanecker, assistant U.S. secretary for higher education, ruled out that option. The $20 billion the program would cost in the next five years would come from announced but unspecified cuts in other agencies, he said.
The proposal, if passed by a Congress now in Republican hands, is intended to help lighten the debt burden on those middle-class families who do not qualify for other kinds of current federal programs. The $10,000 deduction, which would be phased in, is aimed at families that make up to $100,000, where it tapers off. Families whose adjusted gross income hits $120,000 would get no deduction.
An apparent beneficiary would be the smaller private colleges -- not so much the Harvards or the Johns Hopkinses of the world, colleges with cachet for which people are willing to pay. Those more likely to gain include schools such as Goucher, Hood and Mount St. Mary's Colleges, whose high tuition (compared to state schools) scares off many would-be students.
Many private colleges, particularly the elite ones, have suffered a "Manhattan effect," in which most students are wealthy, and therefore can afford exorbitant tuition, or low-income, and therefore get a free ride. At Western Maryland, about 60 percent of students receive some form of financial aid based on financial need, and another 20 percent receive aid based on other factors. The rest pay full price.
Mr. Clinton's plan aims to ease the middle class squeeze. But some experts believe, despite Dr. Longanecker's assurances, that assistance to low-income families would suffer and that the plan's unintended consequence would be to increase the trend of sorting students by class: Upper and upper-middle class students in privates, middle class students in the publics, and the lower class in the community colleges or trade schools.
"A parent who would have sent his kid to Stanford is sending his kid to the University of California at Berkeley, or the University of Michigan," the American Council on Education's Dr. Wilson said. "A parent who would have sent his kid to the University of Michigan is sending his kid to Wayne State or Cleveland State instead."
"What's happening as a consequence is that the schools are becoming more class-oriented. I don't blame that on Clinton policy," Dr. Wilson said, but added, "The Clinton policy exacerbates that."
Private colleges see attracting the upper-middle-class students as their salvation, a way to subsidize their lower-class undergraduates. Whatever its cause, tuition increases have averaged several points above inflation in the past decade, forcing financial aid budgets to grow steeply. Even at Maryland's public campuses, tuition has ballooned 114 percent in that time.
"We are increasingly in a dogfight with public institutions," Dr. Chambers said. "It's so damned expensive that financial aid is a nightmare. It doesn't appear to be controllable."
That's been compounded by a policy swing started by the Reagan administration from federal grants to loans, a move which burdens students with a "negative dowry" they have to repay in later years. That shift has been justified with the philosophy that those who gain most from the education should pay for it.
Mr. Clinton's proposal did not stem from educational philosophy but political pressure, part of the White House's response to the near-complete Republican sweep in national elections this fall, Dr. Longanecker said.
But Dr. Longanecker also said the president's proposal fits neatly as part of a well-reasoned, multi-pronged effort to invest in the education of all Americans. "People who are educated earn much more in the economy," he said. "That's good for them. That's also good for us."
He pointed to the proposed $1 billion increase in funding for the Pell Grant program, which gives students from lower-income families direct subsidies of up to $2,340 per year for their education after high school. But some critics of education policy, including some Republicans, note that many students do not receive the complete allotment, as the number of qualified students always exceeds the amount budgeted for the grants.
At Western Maryland, where tuition reached $14,510 this year and total costs hit $21,050, administrators scramble every year to fill the desired student body of 1,960. One way they achieve that is through doling out financial aid, which takes up roughly a ++ quarter of this year's $29 million campus budget. Each financial aid grant functions as a mark-down on the college's stated sticker price, allowing the school to woo wavering students.
The Sun asked Western Maryland financial aid director Patty Williams to generate profiles of two hypothetical families, each of which has a student attending the college this year. Family X has an adjusted gross income of $35,000, and $15,000 of equity in a home worth $75,000. Family Y has an adjusted gross income of $85,000, and $30,000 of equity in a home worth $200,000.
In this fictional universe, both families X and Y have a sophomore attending Western Maryland College.
If President Clinton's proposal were law right now with no other changes, family X would not derive any benefit from the tax deduction, Ms. Williams' analysis shows. Family Y, however, would see its tax bill shrink by $2,130.
The difference is that family X would qualify for financial aid covering all of tuition as well as some of the additional costs such as room and board, whereas family Y would get assistance that would fall short of full tuition. President Clinton's tax deduction applies only to tuition and fees, but not the other costs.
Would that extra $2,130 tip a wavering family Y toward Western Maryland and away from, for instance, Towson State University, where annual undergraduate tuition and fees stand at $3,288? For some parents, experts say the answer is yes. And for others, perhaps those a bit less affluent, the deduction might persuade them to send a student to a public university rather than community college or no college at all.
"This may well affect the college choice decisions of some parents and their children," said Alexander Astin, director of the Higher Education Research Institute at the University of California at Los Angeles. "They'll want to take advantage of the full benefits."
Some higher education officials, including University of Maryland system Chancellor Donald N. Langenberg, said immediately after President Clinton's address that they feared public universities would simply raise their tuition rates to absorb any possible aid given to parents.
But Dr. Astin said the results of his 1988 study published in the Economics of Education Review, co-authored with then graduate student Carolyn Inoye, indicated that college officials do not plan their budgets that way.
Instead, despite Dr. Longanecker's protestations, Dr. Astin said
the real danger is that the plan could divert funds intended for the grants or loans or other federal programs. If these programs are cut, colleges and the families sending students there will be expected to plug the gaps.
That's why officials at colleges like Western Maryland have been reserved in expressing support for what seems like an unalloyed boon. And real-world families that resemble families X and Y must wait to see if the president's plan goes kerplunk before they start counting on their tuition bills to drop.
A TALE OF TWO FAMILIES
The Sun asked Patty Williams, director of financial aid at Western Maryland College, to create profiles of two hypothetical families with students attending Western Maryland to see how each would fare under the tuition tax deduction proposed by President Clinton.
The bottom line: The upper-middle-class Family Y would save roughly $2,100. Lower-middle-class Family X would not save anything.
As the Department of Education has not yet released specific language on the proposal, the figures involve certain assumptions: for example, that Family Y could apply the money received from loans to room and board and other non-tuition costs. And the grant offered by the college itself is Ms. Williams's best estimate in a hypothetical situation, not the exact dollar figure students in those situations would automatically receive.
If passed, the president's proposal would be phased in over the next five years, so the families of students currently in school would benefit little, if at all.
FAMILY X
Two parents, two children (one in college)
Adjusted gross income: $35,000
Marginal federal income tax rate: 15 percent
Saved for college: $5,000
Student's previous summer earnings: $1,500
Value of home (equity in home): $75,000 ($15,000)
Student Aid Package
FEDERAL
Pell Grant $750
Supplemental Education Opportunity Grant $1,500
Stafford Loan $3,500
Perkins Loan $1,000
STATE
Maryland General State Scholarship $2,500
COLLEGE
Western Maryland College Grant $8,800
TOTAL AID PACKAGE $18,050
Total cost of year (Tuition, room and board, books etc): $21,050
Less total aid package $18,050
TOTAL FAMILY PAID THIS YEAR: $3,000
Total tuition $14,510
ACTUAL TUITION PAID $0
TOTAL SAVED UNDER CLINTON PLAN $0
FAMILY Y
Two parents, two children (one in college)
Adjusted gross income: $85,000
Marginal income tax rate: 28 percent
Saved for college: $5,000
Student previous summer earnings: $1,500
Value of home (equity in home): $200,000 ($30,000)
STUDENT AID PACKAGE
Federal
Stafford Loan $3,045
College
Western Maryland College Grant $6,900
TOTAL AID PACKAGE $9,945
Total cost of year (Tuition, room and board, books, etc): $21,050
Less financial aid package 9,945
TOTAL FAMILY PAID THIS YEAR: $11,105
Total tuition: $14,510
Less grant applied to tuition $6,900
ACTUAL TUITION PAID: $7,610
TOTAL SAVED UNDER CLINTON PLAN: (multiply actual tuition paid by 28 percent marginal federal tax rate) $2,130