In 1997 the federal government, by enacting the Taxpayer Relief Act, inaugurated a systemic change in the way it supports students in their postsecondary education and training. Whereas other federal student aid programs used grants, scholarships and loans to help students and their families finance college, this law made college more affordable by providing new federal income tax credits, savings incentives, and deductions for interest paid on student loans. In this context, this paper examines the implications of these federal tax provisions for state higher education policy. It describes the two federal tax credits designed to help students and their families meet the current expenses of college: the HOPE Scholarship and Lifetime Learning tax credits. This paper also explains the new tax incentives concerning college savings, and the new provisions regarding student loans.