President Clinton has proposed a $30-billion tax cut for families of college students that could save many Princeton students' families up to $2,800 a year.
Families earning as much as $120,000 annually would receive the tax cut, which requires congressional approval and would be phased in by 2003. More than half of the families of the Class of 2001 fall within that income bracket, according to the University financial aid office.
"More than ever, with globalization and the information-based economy, investing in the minds of our people is the most important thing we can do to assure our continued success as a nation," said Clinton, surrounded by college students in the Old Executive Office Building Jan. 20, according to a transcript released by the White House press office.
Despite renewed interest in higher education issues from both parties, Clinton's proposal has spawned some criticism. Some question whether the tax credit will become more of a subsidy for universities rather than a benefit to families.
Because many colleges base their grant and loan awards on family need, decreasing families' need by providing the tax cut would result in colleges offering less aid, some experts say.
University of Texas economics professor and financial aid expert Daniel Hammermesh — who taught at Princeton for four years — anticipated the University would use the tax credit to its own advantage.
"I'm sure they'll be among the first do so — to work around the system so as to use the money as a subsidy," he said, noting that using the tax credit as a subsidy would not be "selfish" but a means of improving universities.
However, University undergraduate financial aid director Don Betterton said that Princeton would not use the tax credit as a subsidy, adding that doing so would be prohibited by federal law.
Betterton also said because the tax credit would affect families' finances during the middle of the academic year rather than when tuition is paid or financial need is determined, it would not become a subsidy.
But Hammermesh argued that neither federal law nor the timing of the tax credit would prevent universities from using it as subsidy. "The federal government cannot require universities to maintain their former levels [of financial aid]," he said.
Nan Wells, director of the University's lobbying efforts in Washington, noted that the last time the federal government offered a tuition tax deduction, Princeton did not decrease its financial aid awards.
Other critics wonder whether the money Clinton would allocate for the tax cut could be better spent helping solely lower-income families.
Betterton, for example, said the University prefers the government provide need-based student aid through traditional programs like Pell grants and Hope scholarships.
Congressman Rush Holt, D-N.J., whose district includes the University, defended targeting higher-income families during an interview Jan. 25.
"The benefit extends to a broader segment of society — it is not just for low or relatively low income people. I think that is an advantage," said Holt, who is the former assistant director of the Princeton Plasma Physics Laboratory.
Despite the criticisms, Wells expressed confidence about the proposal's prospects in Congress because the tax credit is "fairly modest."
However, she and others conceded that Clinton may have some difficulty winning approval from a Republican-controlled Congress in an election year, a traditionally difficult time for passing legislation.
Last year, a similar but more expansive tax-cut bill died in Congress despite some bipartisan support.
Holt agreed that winning approval for the tax credit might be difficult. "There is a powerful segment in the House of Representatives that doesn't want to approve anything the President proposes," he said.
Nevertheless, Holt expressed optimism about winning over Republican critics. "I think it will prove attractive enough to the people around the country that the leadership of the House will have to deal with it in some form," he added.
Clinton attacked potential critics of the proposal even as he announced it. "Some in Congress, I note, are saying that because this is an election year, we really shouldn't try to do anything for the American people," he said.
"Nothing — not a national election or a Washington snowstorm — should get in the way of making a college education more affordable for all Americans," Clinton said, referring to last week's winter storm.
"I had the help of scholarships and loans and jobs," Clinton reminisced. "And if I hadn't had that help, there's no way in the world I would be standing here today."
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