A system of financing college students is needed to meet expenses that are more than parents can afford and students can earn. The gap can only be met by grants, loans, or a combination of both, such as a national system of minimal educational grants supplemented by long-term loans. Individual grants, financed by the federal government and administered by the universities, would be calculated by subtracting estimated parent contributions and student earnings from individual budgets. They would provide a financial base for any low-income student who is enrolled full-time in an accredited college or university. This system should be supplemented by a national system of student loans, available to persons of all income classes and offering several repayment arrangements. The loans could be administered by private financial institutions or by universities. The combined grant-loan system would relieve colleges of the need to provide student aid, while providing funds to pay tuitions. Universities also need financial support for educational research, service operations and capital investments. Unrestricted support could be distributed through a formula that includes the federal government as a partner in meeting cost increases. This formula would lighten university financial loads through federal support, yet permit fund raising from other sources. (WM)