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Higher Ed Roundup...........September 19, 1997

ACT scores rising, schools limiting use of testing in admissions
Average ACT scores for high school seniors rose to 20.0 in 1997, an increase of 0.1 from the 1996 average. The jump represents the second consecutive year of increase, and the fourth in five years. Average scores increased for all racial groups, according to Academe Today.

However, the National Center for Fair and Open Testing (FairTest) reports that nearly 300 four-year undergraduate institutions have eliminated or limited their use of standardized tests as an admissions criterion. FairTest Executive Director Laura Barrett said, "There is growing skepticism on the part of many educators that SAT and ACT scores tell all that much that is very useful about applicants."

Average ACT scores for African American, Asian American, white, and Hispanic students rose by 0.1, while the average for Native American students increased by 0.2.

However, the gap in scoring between males and females, which had been shrinking for nearly a decade, widened slightly. Males' average score rose from 21.0 to 21.1, while females' score remained unchanged at 20.8.

Nearly 60 percent of this year's college freshmen - about 959,300 students - took the test, the highest number ever. (Source: Academe Today, 8/11/97, 8/14/97)

New tax law provides $40 billion in education tax relief
The landmark tax measure recently signed by President Clinton will provide college students and their families with $40 billion in tax relief. It creates a Hope scholarship tax credit of up to $1,500 for tuition and fees paid during a student's first two years of college. It also allows for a lifelong learning tax credit equal to 20 percent of $5,000, paid in tuition only, for the third and fourth years of undergraduate study and for graduate education; the credit is also applicable to non-degree programs that enhance job skills.

Families will also be allowed to make penalty-free withdrawals from Individual Retirement Accounts to pay for higher education. The law also establishes special "educational IRAs" that can receive annual tax-free contributions of up to $500 per child; earnings will be tax free if they are used to pay for education. State-sponsored prepaid tuition plans will be expanded to include room and board.

Section 127 of the IRS Code, which excludes employer-provided educational assistance from taxable income, will be extended through May 31, 2000, for undergraduates. A tax deduction for interest on student loans will be phased in, allowing up to $2,500 in the year 2001 and thereafter. The law also repeals the $150 million cap on tax-exempt bonds that private colleges and universities may hold for capital construction. Finally, the law extends the research and development tax credit from June 1, 1997, through June 30, 1998.

One of the only major drawbacks for education is a House provision that revokes the tax-exempt status of TIAA-CREF. Although the change is expected to reduce pension payments to retirees, the amount of the reduction is not now known. And TIAA-CREF officials are working to minimize the impact on policyholders.

"The Taxpayer Relief Act of 1997" is seen as a victory in the higher education community. Stanley O. Ikenberry, president of the American Council on Education, said, "There is no precedent for such sweeping use of the tax code to help families pay for higher education." President Clinton called it the biggest investment in higher education since the GI Bill. (Sources: Academe Today, 8/6/97, 8/7/97; The Washington Post, 8/6/97; Higher Education & National Affairs, 8/11/97; USA Today, 7/14/97; New York Times, 7/15/97)

Reprinted, with permission, from CASE Flash Points.