S.Amdt. 2620

1. Adds SEC. __. INTEREST DETERMINATIONS ON STUDENT LOANS at the end of title IV

   Adds a section

   In S. 2020 · Placed on Calendar Senate

   (d) Effective Date.--The amendments made by this section shall apply to amounts paid or accrued during the period beginning after December 31, 2006, and before January 1, 2008, and properly allocable to such period, with respect to mortgage insurance contracts issued after December 31, 2006.

   Inserted: SEC. __. INTEREST DETERMINATIONS ON STUDENT LOANS.

   Inserted: (a) In General.--Section 221 (relating to interest on education loans) is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

   Inserted: "(f) Determination of Interest Paid.--In the case of a qualified education loan made after December 31, 2004, for purposes of this section and notwithstanding any other provision of this title--

   Inserted: "(1) In general.--

   Inserted: "(A) Treatment as interest.--Any payment on such loan shall be treated as a payment of interest to the extent of the balance, immediately before such payment, in the accumulated interest account with respect to such loan.

   Inserted: "(B) Exception.--Subparagraph (A) shall not apply to any payment of collection costs, late fees, and penalties.

   Inserted: "(2) Accumulated interest account.--

   Inserted: "(A) In general.--The term 'accumulated interest account' means an account which is adjusted in accordance with this paragraph.

   Inserted: "(B) Increases.--The balance in the accumulated interest account shall be increased for any period by the sum of--

   Inserted: "(i) the loan origination fees incurred by the borrower in such period,

   Inserted: "(ii) the amount of stated interest on the loan for such period, and

   Inserted: "(iii) the amount of any fee imposed under section 428(b)(1)(H) of the Higher Education Act of 1965 (20 U.S.C. 1078(b)(1)(H)).

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   Inserted: "(C) Decreases.--The balance in the accumulated interest account shall be decreased (but not below zero) by payments made on the loan to the extent treated as interest under this section.

   Inserted: "(3) Loan origination fees.--

   Inserted: "(A) Federal programs.--The term 'loan origination fee' includes any fee imposed under any of the following provisions of the Higher Education Act of 1965:

   Inserted: "(i) Section 438(c) (20 U.S.C. 1087-1(c)).

   Inserted: "(ii) Section 455(c) (20 U.S.C. 1087e(c)).

   Inserted: "(B) Fees for services or property excluded.--Except as provided under subparagraph (A), the term 'loan origination fee' does not include any fee which is a fee for services or property.

   Inserted: "(4) Stated interest.--The term 'stated interest' means, with respect to any period, the amount of interest determined for the period based on the stated rate of interest applicable to the period (whether or not the interest is required to be paid in such period).

   Inserted: "(5) Anti-abuse rule.--The Secretary may prescribe rules to prevent the acceleration or deceleration of additions to the accumulated interest account where the loan origination fees or stated interest do not properly reflect the substance of the loan.".

   Inserted: (b) Information Returns.--

   Inserted: (1) Interest and loan origination fee defined.--Subsection (e) of section 6050S (relating to the general rule for form and manner of returns) is amended by inserting before the period at the end the following: ", and the term 'interest' has the same meaning as when used in section 221".

   Inserted: (2) Pre-2005 loans.--The regulations under section 6050S of the Internal Revenue Code of 1986 which are applicable to loans made before September 1, 2004, shall also apply to loans made on or after such date which are made before January 1, 2005.

   Inserted: (c) Effective Date.--The amendments made by this section shall apply to taxable years beginning after December 31, 2004.

   Original wording

   At the end of title IV, add the following:

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As printed