THE WHITE HOUSE
Office of the Press Secretary
PRESS BRIEFING BY
SECRETARY OF EDUCATION DICK RILEY
AND NATIONAL ECONOMIC ADVISOR GENE SPERLING
The Briefing Room
12:13 P.M. EST
MR. KENNEDY: Good morning. We're pleased to have here Secretary Riley and Gene Sperling, who are here to brief you on the President's upcoming announcement regarding investments in higher education. Thank you.
SECRETARY RILEY: Thank you and good morning. For many of us in this country a college education may be the second most expensive investment in our lives, after a home. And education is perhaps the most important investment of all. In the workplace, a college degree is worth some $17,000 a year more than a high school diploma, on average. Over a lifetime, it comes to some $600,000 for the difference.
More and more, college is the gateway to the American Dream. American families know that there is no better investment than education. As a country, we need to help America's parents pay for a college education for their children, and pay for the continuing post-secondary education that they need during a lifetime.
Too often, families have to rely heavily on loans to pay for education. The average student loan balance for undergraduates in the class of '98 was nearly $10,000, and graduate students borrowed nearly $23,000 each. Students under this debt burden may limit their education plans, certainly, and restrict their career choices.
Now, the President's plan will help to reduce the amount of borrowing necessary for college. And it's part of the administration's sustained commitment to expanding federal student aid over the past seven years. Federal student aid has more than doubled since 1993, from $22 billion to $50 billion a year. Pell Grant scholarships for needy students have increased by half, from a maximum of $2,300 in 1993 -- the same, I might add that it was during the entire period that President Bush was in office -- raised now to $3,300 a year for the maximum grant. Today, President Clinton has proposed increasing it again for next year to $3,500 maximum grant.
The administration has increased work-study funds by 40 percent, helping 1 million students to work their way through college, a wonderful program. Thanks to student loan reforms, including direct loans, students have saved over $8 billion in interest payments and fees. Taxpayers have saved an additional $5 billion.
And President Clinton achieved the enactment of the HOPE Scholarship and the Lifelong Learning tax credits in 1997. HOPE offers up to $1,500 for the first two years of college; Lifelong Learning offers up to $1,000 for every year of education thereafter.
When the President proposed them, these tax credits were controversial. But today, I'll tell you, the results are in, and we can see that they have made a real difference in American families. For instance, some said the taxpayers wouldn't know about the new tax credits, but the Treasury Department estimates that 4.7 million families claimed $3.4 billion in credits in 1998. Some said the students wouldn't benefit from these tax credits because colleges would just raise their tuition. But according to the College Board, tuition and fees increases this past year were the lowest in the last four years, and states like California and Massachusetts have even cut tuition for their colleges.
Some said the new credits were only for those who didn't need them. More than half the families who claimed the credit earned less than $50,000 a year. Nineteen percent of those who claim credit earn less than $20,000 a year.
For years, we used our tax code to encourage investment in bricks and mortar -- the tax deductible interest on home loans. But today, there is no more important capital investment than the skills and the knowledge of our citizens.
Making college tuition tax deductible is an idea whose time has come. President Clinton's plan does this idea one better by giving families in lower tax brackets the same benefits as their middle-income peers. At the same time, the President's budget will provide the most federal need-based scholarships ever.
Two weeks ago, President Clinton announced his plan to help build and repair America's schools. Today, he announced his plan to help the American family build a brighter future through lifelong education. And I urge Congress to pass it.
Gene? Gene Sperling.
MR. SPERLING: Let me say a word about how this expansion of the college opportunity tax cut fits in, supplements and strengthens what the President passed in 1997 as part of the balanced budget agreement with Hope scholarships and the Lifelong Learning tax credit.
The Hope Scholarship is for the first two years of school, and it gives a student a 100-percent credit on the first $1,000. And then a 50-percent credit on the second $1,000. So, for somebody going to a community college, tuition that costs $2,000, they would get a $1,500 tax credit. So it gives a very exceptional tax credit to encourage people to get into school and go to the first two years of college. As Secretary Riley said, this has been very successful and very popular. And again, what it provided the most help for was to make sure that everybody had the opportunity to go to some form of college.
In addition to that, what the Lifelong Learning tax credit said was that you could also, for your third or fourth year of college, or for grad school, or for courses a worker might take, get a 20 percent credit up to $5,000. So that could be worth $1,000, and over time that would go up to $10,000, so it could be worth up to $2,000.
As we came into this year, one of the things that we thought would be a good strengthening for our tax cut would be to strengthen the Lifelong Learning tax credit, strengthen that 20 percent tax credit, so that we were doing more in the third and fourth year of college and grad school, et cetera. At the same time, there was a proposal from Senator Schumer in New York that was asking for full deductibility of college for people making up to $120,000, which was designed to deal not only with the third and fourth year, but for families, middle-income families who faced significant college costs, to give them somewhat more assistance for those with exceptional or large tuition costs.
What we did is essentially merge these two proposals into a College Opportunity tax cut. And what it does is, it takes the core of Senator Schumer's and Olympia Snowe's, the Schumer-Snowe proposal -- and gives full deductibility for families, phasing out between $100,000 and $120,000. So we offer that deductibility.
But we wanted to make sure that even families at the 15 percent bracket, which consists of 70 percent of taxpayers, that they also were getting an equal benefit. And so we gave people the choice of taking full deductibility or a 28 percent tax credit. So this not only provides the full deductibility for tuition up to $10,000, as proposed in the Schumer-Snowe plan, it also, in a sense, gives that same benefit to people in the 15 percent bracket. In a sense, it's better than deductibility in the 15 percent bracket, because the people get a 28 percent credit. The deduction is helpful for people in the 28 percent bracket, because it protects many of them from hitting the alternative minimum tax.
So what this does is, it adds a significant increase for families who have higher tuition costs, who are in the 28 percent bracket. It gives, in addition, for all families, an increased credit for all families in the third or fourth year of college or grad school. And it's an increase for any worker who is trying to go back to school, maybe even just to take a couple of courses, who now -- who previously in the Lifelong Learning tax credit could take a 20-percent credit their first $5,000, now gets a 28-percent credit of up to $10,000.
So we think this is a strong addition, a strong complement to what's been a very successful effort that the President instituted in 1997, with the HOPE Scholarship and the Lifelong Learning tax credit.
In addition, we will include the education tax cuts that were in last year's proposal, the two of which probably drew the most attention were ensuring -- 127 -- the employer-provided education applies to grad school as well as undergrad; and secondly, that student interest is deductible not just for 60 months, as currently proposed, but for as long as is necessary.
I just want to add that as part of -- while this is a critical part of this package, we also have other elements. One thing that Secretary Riley, the President and others have been concerned about is that there is a lot of evidence that financial costs and sometimes social pressures have left some of the people coming into school, particularly those from minority and disadvantaged backgrounds, to leave in the first or second year. Despite this, there are successful examples of colleges who have been able to address this, and so this is an addressable issue. So one thing we put in is a demonstration project to work with the very successful TRIO program in seeing if we can have college completion grants and see what we can do to learn more about how we can help more people complete college.
We also have, again, another substantial increase in Pell grants. Pell grants were $2,300 when we took office; they would now be at $3,500, over a 50 percent increase. We've increased the supplemental education opportunity grant, work study, and so then that was the second component, the other aid.
The third component is, we think it's absolutely critical to do everything we can for people in their teen years to give them the hope, the expectation that they are going to be on a path towards higher education. So the Gear-Up initiative, which is a brand-new initiative, which got $120 million in its first year and $200 million is already serving 750,000 students in which colleges essentially adopt disadvantaged kids in middle school at 7th grade, and stay with them in long-term mentoring and guidance, all the way so that these young people, even though they may be from families where no one's gone to college, have an expectation and an initiative from six or seventh grade to -- that they're going to go to college. This will be expanding by $125 million, or a 62.5-percent increase.
TRIO has one of its largest increases of $80 million, well over double-digit increase. Another initiative is the youth opportunity grant. This is to go after out-of-school youth, to get them back into a learning environment, get people back in school, and hopefully, so that they, too, can go on a path to college. This was part of the work force training initiative -- it was $250 million competitive grants dealing with out-of-school youth, concentrated effort so you can really have impacts on neighbors and communities. And this has a $100 million increase, as well as significant, almost doubling of Youth Build.
So, again, there's really three components. There's the new college opportunity tax cut; there's the second -- increases in the other forms of college aid such as Pell Grant; and third, a $400 million package for this year alone in programs like TRIO and Gear-Up, to encourage more disadvantaged -- economically disadvantaged youth to aim high for college and stay on the right track.
And Secretary Riley and I are happy to take any questions that you have.
Q I was wondering, then, are you proposing that they replace this new tax deduction, tax credit? Would you be getting rid of the Lifelong Learning -- I mean, would it be a full replacement, or would this be an addition?
MR. SPERLING: This would be an expansion of the Lifelong Learning tax credit. So this would essentially take the Lifelong Learning tax credit, which I said was 20 percent of the $5,000 going up, and now make that a 28 percent credit -- or a deduction, if that works better for someone, as Chuck Schumer and Olympia Snowe proposed.
As Secretary Riley was saying, the HOPE Scholarship tax credit would remain the same. And for anybody in their first two years who has tuition under $5,000, they will still prefer the HOPE Scholarship. So if you can think in your mind, 28 percent of $5,000 is $1,400. So if you have tuition, for the majority, the large majority of students who have tuition from $2,000 to $4,000, they will still prefer the HOPE Scholarship tax credit for their first two years.
SECRETARY RILEY: I might point out, the HOPE Scholarship goes to the student, and the tax credit goes to the family. So that could cause part of that decision. And then when it goes up to $10,000 in 2003, there is a period in there determined by the tuition costs that the tax credit will mean more than the HOPE Scholarship.
Q Gene or Mr. Secretary, I wonder if you can address what the likelihood or the reality of this getting passed through the Republican-controlled Congress would be this year.
SECRETARY RILEY: We think it has a very good possibility of being passed. The fact is the Schumer-Snowe measure had tremendous bipartisan support, and we think that certainly it could be passed. Congressman Harold Ford -- and I don't know who else, but I know he was one of the leaders in the House that proposed the same thing -- so, a little different. Ours certainly has the feature where the low-income people really benefit from this 28 percent, whether in the 15 percent category up to earnings of like $44,000. They would be raised to the 28 percent limit, which is really helping the low-income people.
We think it has a very good chance of passage, and this combination of things is very, very powerful. If you talk to any families out there with young children or teenaged children or children in college, this cost of college is a very significant factor, and this would be a tremendous help in the year 2003 when it goes up to $10,000, it could really be, for many, many families, like a $2,800 scholarship.
MR. SPERLING: I just want to respond. Obviously, there were some comments by the Senate Majority Leader suggesting that, somehow, we should all take this year off when it comes to major initiatives. I don't think most employers tell their employees to take a quarter of the week off every week, or that teachers tell their students to take a quarter of the week off from their class studies, and our employers are the American people, and I don't think they're asking us to take one out of every four years off.
This is addressing very important college opportunity needs. I think the American people would like to see us act on it this year, and I don't think they'll have much tolerance as our employers for telling us just to take the time off.
Q What will be the impact of this proposal in terms of families who are not getting aid receiving aid, or families who are getting aid receiving additional aid? What added proportion of college students would get a benefit from this?
MR. SPERLING: I'm not sure I totally understand your question. One thing is, you cannot take this and the HOPE scholarship at the same time. So a family has to choose between those --
Q How many people would get help, is basically what I'm asking you.
SECRETARY RILEY: Well, if you look at family earnings anywhere up to around $44,000 -- that's where the bracket shifts from 15 percent to 28 percent -- anybody in that lower bracket, which is the lower middle income and poor families, would have the 28 percent benefit for the tax deduction. Those who are above the $44,000 category up to $100,000, when it begins to phase out, would have the 28 percent instead of the 20 percent they have now. So for some, it would be very significant. For others, it would be significant -- going from 20 to 28.
Q But you put a whole price tag on this. You must have some estimate of how many people would take it.
MR. SPERLING: No, he asked the question of how many new people would. I think you should understand that when you're doing something like this, it's not just picking up new people who aren't getting aid. It's also designed to make sending your child to college -- which we think is good for the child and the family, but also good for our economy and having a more productive work force, and has wider social and economic benefits -- should not be as great of a drain on the resources of the families who are basically doing the right thing.
The second thing is, I think all of our aspirations should be that young people should be able to go to the best school that they can get into by virtue of their academic performance. So for somebody who -- for somebody who wanted to go -- say, had $10,000 of tuition costs and were in grad school or their third or fourth year, right now the most they would get is $1,000, 20 percent of $5,000. This would now give them $2,800.
Certainly, for some people, that extra $1,800 could make a difference in whether they can go to the school they choose, whether they can go to grad school right away, whether they have to only go half-time. So it's not just bringing new people on, it's providing incentive for people to maximize their educational opportunities.
Q But I guess what I'm asking, since you put a budget number next to this, I mean, $30 billion -- you must have had some idea of how many people would take it.
MR. SPERLING: Absolutely. And I do not know. Let me speak with -- and you're right that they will have a calculation of the number of people who are using it. Sometimes, when you have conflicting tax cuts, it's not an easy of a determination, because you have some people switching from an existing tax cut, but I can try to get back to you on that.
SECRETARY RILEY: I don't think you were here -- you might have been -- when I mentioned the 4.7 million families that took the combination of Hope and the tax credit in year 1998. So we do have that, and it was at a cost of $3.4 billion in tax credits. So we have 4.7 million.
Q This would be much, much more, it sounds like.
SECRETARY RILEY: This would be more.
MR. SPERLING: Mara, I just got the precise answer, which is -- the Treasury estimator is ill. And so we will get it for you as quickly as possible. (Laughter.)
SECRETARY RILEY: It's a good answer.
Q But I just have one more question. It seems like there's a theme running through a lot of the proposals the President is making these days, which is, some of them are new, but some of them are old, or they're being resurrected, but they have a bigger price tag. In other words, you're starting with a kind of bigger bargaining position. And I'm wondering why you've chosen that strategy this year. I mean, is it because the budget surplus is bigger, or what?
MR. SPERLING: I would encourage people to pick up "Putting People First" or read 1992. I think most of the things the President is doing are new innovations or additions of strengthening of a very basic economic philosophy he's had on fiscal discipline while giving people tools to succeed in the new economy, from education to training to technology investments. Certainly, from day one this President has been extraordinarily focused on the belief that part of productivity growth in our country was not simply reducing the deficit, lower interest rates, and spurring increased capital stock, but was also spurring people to get higher educations, because we think that's critical to productivity. And that obviously was the core of his agenda.
So what you're seeing is different increments on that very basic theme. And I think here, I think certainly a very positive way to make public policy is to put out a proposal like HOPE scholarship, et cetera. If it's successful, you see what you learn from, and you see where the gaps are. And then at another time where you have additional resources, maybe you can fill that gap. And here, in 1997, when we were in a very tough balanced budget situation, we decided to put our focus on the first two years of college because of studies that show that if you can get people through the first two years, there's far greater likelihood that they will -- well, first of all, two years of college education tends to make an extraordinary difference in a person's earnings throughout their lives, but also it's very likely they will go on. That was our focus.
Now, yes, as we've been successful in keeping fiscal discipline, we are trying to strengthen in a reasonable way, within that fiscal discipline, some of these initiatives. And now I think we can do a little more for the third and fourth year of college, and for lifelong learning. And I think this will be part of a fiscally prudent package that will still be around $250 billion net tax cut, and part of a plan that will pay off our national debt within 15 years.
MR. KENNEDY: Thank you very much.
END 12:38 P.M. EST