The Hope Scholarship is actually a tax credit, not a scholarship. Tax credits are subtracted from the family's tax liability, rather than reducing taxable income like a tax deduction. A family must file a tax return and have a tax liability to take advantage of it. The Hope credit is not refundable for families who do not have a tax liability or have a tax liability less than the maximum amount of Hope tax credit for which the family is eligible.

The actual amount of the credit depends on the family's income, the amount of qualified tuition and fees paid, and the amount of certain scholarships and allowances subtracted from tuition. The total maximum credit also is based on the number of eligible dependents rather than a maximum dollar amount for the family as with the Lifetime Learning tax credit.

The Lifetime Learning credit is a tax credit available to individuals who file a tax return and have a tax liability. This means the amount of the credit is subtracted from the family's actual tax liability, rather than reducing taxable income like a tax deduction does. The Lifetime Learning credit is not refundable.

The actual amount of the credit depends on the family's income, the amount of qualified tuition and fees paid, and the amount of certain scholarships and allowances subtracted from tuition. This credit is family-based (i.e., $1,000 per family) rather than dependent-based like the Hope Scholarship.

Additional information is available by visiting the National Association of Student Financial Aid Administrators.