Education: Lost Loophole

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With the cost of sending an offspring through college rising more than 70% since 1970, the Government has been willing to come to the rescue when family funds fall short. Now it seems that Uncle Sam has been reviewing his own budget.

The sore point is that middle-income parents may be exploiting a loophole in Health, Education and Welfare student-aid regulations to use money—totaling $3 billion this year—that might otherwise go to needier families. The trick: to plan ahead and not claim the college-bound child as an income tax exemption. The federal basic grants program considers any student not receiving more than $600 a year from his parents "independent" and thus eligible for up to $1,400 in aid.

HEW now proposes that no student can declare his independence unless his parents have not claimed him as a tax deduction for two years; further, he may live at home for only six weeks during the year he receives aid as well as the year prior to his grant. HEW hopes that the new rules will shake loose more federal money for students who really need it—unless, of course, middle-income taxpayers start planning even farther ahead and farm the kids out to live with the relatives.