Clinton switches rules on tax credit

THE "Hope Scholarships" for higher education that Bill Clinton touted in the run-up to the presidential election in the United States have fallen victim to that morning-after feeling, writes Tim Cornwell in Los Angeles.

President Clinton's higher education package won the blessing of the academic community this week. But the tax credit of up to $1,500 per student for two years that he promised families in the election campaign has changed. The idea was to make the first two college years as automatic as the last two school years. The credit was an automatic refund to families to meet college bills whether they paid taxes or not.

But pressure from Republicans in Congress and from Internal Revenue Service officials worried about fraud has taken its toll. Mr Clinton has now announced that the credit will be "non-refundable". It will be deducted from tax bills paid and low-income families may no longer qualify. The change emphasises the Clinton administration's preoccupation with middle-class voters. Some experts welcomed it, however, as lessening the temptation for cheaper colleges to raise fees to the full $1,500.

But Stan Ikenberry, president of the American Council on Education, said the package should allay fears that families cannot afford to send children to college. Under it, poor families would still benefit from a rise in Pell grants, aimed at the very worst off, to $3,000.

Mr Clinton also moved to halve borrowing fees on government loans to students, from 4 to 2 per cent a year. With other tax deductions for higher education, and $1,000 "presidential honors scholarships" going to the top 132,000 high school students across the country, its total cost would be close to $40 billion.