The Basic Grant Application Form contains instructions to record the present "market value" of assets. Further, there are instructions not to use such valuations as Assessed Value, Insured Value, Taxed Value, etc.

It is felt that the current market value of most stocks, bonds, and other such securities can be ascertained by reference to the financial pages of a major metropolitan newspaper nearest to the applicant's home. The determination of the value of home, farm or business assets presents a greater problem. As noted above, applicants are specifically requested to avoid using assessed value, taxed value, etc. because procedures for determining such valuations vary widely from community to community. It is felt that considerable expertise and specific knowledge of local taxation practices would be required to calculate, on a formula basis, market value from assessed value of a specific home in a particular locale.

A more reasonable approach is to assume that individuals with assets in homes, farms, or businesses are made aware of their current market value by reference to prices paid for comparable asset holdings in their community. Thus, applicants are instructed to record their estimate of market value on this basis. It should also be noted that applicants are required to report debts against their asset holdings which are more readily obtainable.

13. What validation studies have been completed to give us an idea of how accurate people are in reporting assets? Income? What percentage of application forms are checked against the figures reported to the Internal Revenue Service on income tax statements?

There are certain obvious complexities involved in verifying assets which make a large-scale validation effort on this subject difficult to mount. To date, we have not conducted any nationally representative studies which focus on validating reported asset holdings. We have, however, conducted research into the accuracy of income reporting.

The Basic Grant Program conducted a statistical study with the assistance

of the Internal Revenue Service in 1975 to determine the extent to which income information reported on the Basic Grant application form is similar to or at variance with income information reported on the IRS tax returns for various categories of applicants.

In the IRS comparison study, a representative sample of Basic Grant applicant records (126,800) were randomly selected from the 1974-75 applicant data base for comparison with IRS records. The most significant finding of this data comparison was that 81.5 percent of the total applicant population report incomes accurately within + $200.

In addition, 13 percent of all applicants under-reported their incomes to the Basic Grant program by $200 or more and 5.5 percent over-report their incomes by $200 or more. These findings compare quite favorably with similar research findings conducted for applicants submitting forms to one of the major need analysis services.

We might also note that the Basic Grant program is in the process of conducting another such income comparison study with the assistance of the IRS for applicants that filed Basic Grant applications during the 1976-77 academic year. The Basic Grant program intends to conduct periodic statistical assessments of the scope and nature of misreporting to assess the general accuracy of income data reported on the Basic Grant application form and on the basis of specific discernible trends, review Basic Grant program procedures in order to maintain the accuracy of reported income data at acceptable levels. Applicants are not required to submit copies of their IRS tax returns at the time of application.

The Basic Grant program has conducted, in addition

to the IRS comparison study to determine the overall rate of misreporting, an effort to validate individual student reported application data since the 1975-76 academic year. Applicants are included in the validation effort on the basis of (1) sampling the applicant data base for high risk cases, determined by a set of pre-established criteria (PEC), and (2) referrals from institutions of higher education of cases containing discrepant information which cannot be resolved at the institutional level.

Applicants validated under the above mentioned categories were requested to supply: (1) a notarized copy of their (or parents') income tax return, (2) A notarized copy of their (or parents') W-2 forms, and (3) a notarized statement confirming the amount of the nontaxable income received in the year prior to which aid is requested. During the 1976-77 academic year, a combined total of approximately 7,100 (6,000 PEC and 1,100 institutional referrals) cases were validated. The final reports on the results of this validation effort are in

draft stages.

For the 1977-78 academic year, a total of 8,000 applicants will be selected from the applicant data base for follow-up and an estimated 1,200 additional students which institutions are unable to validate will be referred to the Office of Education for follow-up and resolution.

14. Is it correct that a student who lived with his parents during January and February of 1976 and then got married in March of 1976 and moved out to live with his wife would be a dependent student this September even if he received less than $600 from his parents in either 1976 or 1977 and was not taken as a tax exemption by his parents for either year? Wouldn't the proposed new rule result in the same dependency status for students who got married even a year earlier?

Present regulations regarding the independent student state that any applicant who was claimed for Federal income tax purposes by his parents during

the year prior to application (the base year), received more than $600, or

lived with his parents for more than two weeks, is defined as a dependent

student and must report his parents' financial information.

The rationale

of the Office of Education has been that the fact that a student has recently married does not necessarily prove an applicant's financial independence from

parental support as defined by these indicators.

In addition, the fact that a student has recently married and left his or her parent's household should not necessarily entitle the student to special consideration as an independent student for purposes of receiving Federal financial aid. The married student should be required to fulfill the same criteria as all other applicants in determining the financial relationship with his or her parents. Some students may still be receiving parental support, even though married, so that marital status cannot be considered a reliable measure of financial independence. The answer, therefore,

to the question is yes, the student would be considered a dependent student and must file with parental information.

The Office of Education recognizes, however, that there are some serious problems of equity in the case of independent students. The Office of Education would like to emphasize the fact that additional consideration is being given the problem of independents including the married student, and that we hope to present a more equitable proposal to the Congress by next March.

15. Figure 1 of Mr. Kornfeld's statement shows 140,000 veterans receiving BEOGS last year. Do you know how many of these are independent? Whether full-time or part-time students? How many are married? Do you feel our treatment of veterans under the G.I. Bill is fair? If not, what would you recommend?

Congressman Quie referred to the fact that approximately 140,000 veterans receiving educational benefits applied for Easic assistance and were determined

As you know, Secretary Califano announced the establishment of the
Bureau of Student Financial Assistance on March 8, 1977, as part of
his reorganization of the Department. His purpose was to consolidate
student financial aid resources and increase cooperation among the
various student aid programs in order to provide the kind of leader-
ship necessary to make sure that these programs are sensitive to
student needs and accountable under sound financial practices.
Commissioner Boyer on April 11, 1977, in announcing the reorganization
of the Office of Education reaffirmed the need for and the important
role of the Bureau of Student Financial Assistance.

Over the past several months we have been developing organizational
plans for the new Bureau which would most effectively carry out the
Secretary's mandate. This week, the proposed organizational structure
through the Division level will be published in the Federal Register.
A copy of the approved organization is attached.

During the next several weeks we will be completing the details of the
organization at the branch and section levels, including the staffing
of each organizational unit. In addition, we will also be consulting
with OE management and the Union regarding our plans. As soon as we
have completed the planning and other steps necessary to finalize the
organization and staffing of the Bureau, we will provide each of you
with your organizational assignment, your supervisor's name, and a
more detailed organization chart. We will also hold orientation
sessions to discuss the Bureau's organization structure and goals,
introduce key personnel and answer questions.

foot. Kufe

Leo L. Kornfeld

Attachments

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