The RAND Institute on Education and Training conducted an analysis of Federal policy options to improve education in low-income areas. The analysis focuses on Chapter 1 of the Elementary and Secondary Education Act of 1965, the nation's program for assisting educationally disadvantaged students. After a quarter century of Chapter 1 efforts, it is an appropriate time to review its accomplishments and problems and to assess options for strengthening the program. A number of approaches yielded information about Chapter 1 implementation and impacts, including comprehensive review of existing evaluation data, invited commentaries by 91 experts, and a commissioned study of Federal options for school-finance equalization. RAND recommends a new three-part strategy for meeting the needs of low-income students: (1) increase Chapter 1 funding for the lowest-income schools; (2) reformulate Chapter 1 to encourage better education for low-income children of all achievement levels; and (3) use a separate general-aid program to provide incentives for equalizing overall funding within states. (SLD)