BEYOND TAX RELIEF - LONG-TERM CHALLENGES IN FINANCING HIGHER-EDUCATION

The Administration has proposed an increase in Pell Grant spending and a new tax credit and deduction for college expenses, ambitious initia tives that are estimated to cost approximately $48 billion over the ne xt five years. The primary weaknesses of the tax proposals are that th ey are not very well targeted and could be abused for leisure-oriented coursework. On the other hand, the potential for ''tuition inflation' ' has probably been overstated by the plan's critics: the primary effe ct of the plan is to raise families' income and will do little to redu ce the cost to families of future tuition increases. It is, perhaps, m ore problematic that the plan does little to resolve the deeper struct ural problems in how we pay for college--with a complex morass of fina ncial aid programs and a financial aid formula that taxes income and s avings at high rates. That financial aid system will be put under incr easing strain in the coming years, as larger cohorts reach college age and seek to maintain the currently high rates of college going. The p aper concludes by recommending greater reliance on income-contingent l oan forgiveness as an alternative way to help families pay for college .