The nature and scope of tax policies that affect higher education are sketched, concentrating on the provisions of the tax code that directly help families finance college costs. Attention is directed to: proposals to expand the range of tax benefits for higher education, the merits of existing and proposed tax schemes in times of reduced federal revenues, estimated taxes saved for individual families, and distribution of benefits by income level under different provisions. Additionally, tax breaks for higher education are compared with conventional student aid programs. Current tax breaks to help families finance college encompass two main approaches: permitting certain expenditures or investments to be excluded from the family's taxable income; and allowing parents to shift income from themselves to their children and thereby reduce the family's tax liability. Proposals for new tax breaks include: tax credits or deductions for current expenses, tax deductions for college savings, and tax-free income on college savings accounts. It is concluded that direct student aid programs are generally a more effective and equitable means of helping families meet college costs than are tax incentives intended to achieve the same objectives. (SW)