The HOPE "Scholarship" is not technically a "scholarship." It is a tax credit available to eligible students during their first two years of post-secondary education. The tax credit may be used on 100 percent of the first $1,000 of tuition and fees and 50 percent of the second $1,000 during the qualified period. The credit will be available on a per-student basis for net tuition and fees (less grant aid) paid for college enrollment after December 31, 1997. The credit is phased out for joint filers between $80,000 and $100,000 of income, and for single filers between $40,000 and $50,000 (indexed after 2001). The credit can be claimed in two taxable years (but not beyond the year when the student completes the first two years of college) with respect to any individual enrolled on at least a half-time basis for any portion of the year.

Lifetime Learning Credit for College Juniors, Seniors, Graduate Students and working Americans pursuing lifelong learning to upgrade their skills. For those beyond the first two years of college, or taking classes part-time to improve or upgrade their job skills, the family will receive a 20% tax credit for first $5,000 of tuition and fees through 2002, and for the first 10,000 thereafter. The credit is available for net tuition and fees (less grant aid) paid for post-secondary enrollment after June 30, 1998. The credit is available on a per-taxpayer (family) basis, and is phased out at the same income levels as the HOPE Scholarship."

To be eligible, a student must be enrolled in a degree, certificate, or other program leading to a recognized education credential (i.e. associate degree, automotive technician certificate, etc.). The student must be enrolled at least half time.

The tax credit is available for two tax years to those students who have not completed the first two years of post-secondary education.

HOPE applies only to tuition and fees — not to books, dormitory costs, or other living expenses.

The amount of tuition and fees covered by the HOPE tax credit is reduced by other grant and scholarship aid received. This includes scholarship funds excluded from an individual’s gross income, as well as federal grant aid such as Pell Grants.

Example:

If a student incurs $1,250 in tuition and fees and receives a Pell Grant greater than $1,250, he is not eligible for the HOPE credit. Or, if a student is responsible for $1,250 in tuition and fees and receives a Pell Grant of $700, the student is eligible for a tax credit of $550.