S. 359Senate110th Congress (2007-2009)In Committee

Student Debt Relief Act of 2007

A bill to amend the Higher Education Act of 1965 to provide additional support to students.

Introduced January 22, 2007

Legislative Activity

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SenateIntro Referral Latest Action

Read twice and referred to the Committee on Finance. (text of measure as introduced: CR S848-851)

January 22, 2007

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SenateIntro Referral

Introduced in Senate

January 22, 2007

SenateIntro Referral

Sponsor introductory remarks on measure. (CR S847-848)

January 22, 2007

SenateIntro Referral

Read twice and referred to the Committee on Finance. (text of measure as introduced: CR S848-851)

January 22, 2007

Floor Debate

13 members

What members said about S. 359 on the floor

7 Republicans6 Democrats
Arlen Specter
Sen. Arlen SpecterR-PA · Jan 22, 2007

Mr. President, once again I seek recognition to introduce legislation that will give the public greater access to our Supreme Court. This bill requires the high Court to permit television coverage of…

Dianne Feinstein
Sen. Dianne FeinsteinD-CA · Jan 22, 2007

Mr. President, as the new Congress begins work, I am pleased to join with Senator Domenici in addressing one of the most serious and intractable problems facing the Nation--restoring the long- term…

Olympia J. Snowe
Sen. Olympia J. SnoweR-ME · Jan 22, 2007

Mr. President, I rise today to introduce the Genetic Information Nondiscrimination Act of 2007 and I am joined in doing so by a number of my colleagues including the Chairman and Ranking Member of…

George V. Voinovich
Sen. George V. VoinovichR-OH · Jan 22, 2007

Mr. President, I rise to introduce The Secure Travel and Counterterrorism Partnership Act of 2007, along with my good friends Senators Akaka, Lugar, and Mikulski. This legislation would expand the…

Edward M. Kennedy
Sen. Edward M. KennedyD-MA · Jan 22, 2007

Mr. President, it is a privilege to introduce the Genetic Information Nondiscrimination Act of 2007. It is an honor to join Senator Snowe, Senator Enzi, Senator Dodd, Senator Harkin, Senator Gregg,…

Show 8 more
Joseph R. Biden Jr.
Sen. Joseph R. Biden Jr.D-DE · Jan 22, 2007

Mr. President, I rise today to introduce the Homeland Security Trust Fund Act of 2007. I introduced this legislation in the last Congress, and I do so again because it is my sincere belief that in…

Edward M. Kennedy
Sen. Edward M. KennedyD-MA · Jan 22, 2007

Mr. President, today I rise to introduce the Student Debt Relief Act of 2007. It's long past time for Congress to take action to address the crisis in college affordability. The cost of college has…

Sam Brownback
Sen. Sam BrownbackR-KS · Jan 22, 2007

Mr. President, I rise today to introduce the Unborn Child Pain Awareness Act. I am joined by 27 original cosponsors. After carefully reviewing the medical and ethical arguments that underpin this…

Pete V. Domenici
Sen. Pete V. DomeniciR-NM · Jan 22, 2007

Mr. President, I rise today with my colleague, Senator Feinstein to introduce the Social Security and Medicare Solvency Commission Act. Our country is facing a looming financial crisis. The Medicare…

Daniel K. Inouye
Sen. Daniel K. InouyeD-HI · Jan 22, 2007

Mr. President: I rise today to join my colleague Senator Feinstein in introducing probably one of the most important bills we can consider this Congress in terms of energy, economic, and…

Mike Crapo
Sen. Mike CrapoR-ID · Jan 22, 2007

Mr. President, today I introduce the Improving No Child Left Behind (INCLB) Act. As a father and a legislator, I am committed to advocating for public education in Idaho and throughout the Nation.…

Chuck Grassley
Sen. Chuck GrassleyR-IA · Jan 22, 2007

Mr. President, I rise today to reintroduce the Sunshine in the Courtroom Act, a bipartisan bill which will allow judges at all Federal court levels to open their courtrooms to television cameras and…

Barack Obama
Sen. Barack ObamaD-IL · Jan 22, 2007

Mr. President, since coming to the Senate two years ago, I have worked to fulfill pledges I made during my campaign. The first piece of legislation I introduced, the HOPE Act, addressed my pledge to…

Show 2 more
Barack Obama
Sen. Barack ObamaD-IL · Jan 22, 2007

Mr. President, since coming to the Senate two years ago, I have worked to fulfill pledges I made during my campaign. The first piece of legislation I introduced, the HOPE Act, addressed my pledge to…

Bill Nelson
Sen. Bill NelsonD-FL · Jan 22, 2007

Mr. President, today I am introducing legislation authorizing two important Everglades projects: the Indian River Lagoon, IRL, and the Picayune Strand Restoration, PSR. Senator Mel Martinez has…

Bill Text

Latest available legislative text

Reading Mode
Latest
Introduced in SenateIssued January 22, 2007

II

110th CONGRESS

1st Session

S. 359

IN THE SENATE OF THE UNITED STATES

January 22, 2007

Mr. Kennedy (for himself, Ms. Mikulski, Mr. Lieberman, Mr. Schumer, Mr. Durbin, and Mr. Obama) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Higher Education Act of 1965 to provide additional support to students.

1.

Short title

This Act may be cited as the Student Debt Relief Act of 2007.

2.

Increase in Federal Pell Grants

(a)

Program authority

Section 401(a)(1) of the Higher Education Act of 1965 (20 U.S.C. 1070a(a)(1)) is amended by striking 2004 and inserting 2012.

(b)

Amount of grants

Section 401(b)(2)(A) of the Higher Education Act of 1965 (20 U.S.C. 1070a(b)(2)(A)) is amended by striking clauses (i) through (v) and inserting the following:

(i)

$5,100 for academic year 2007–2008;

(ii)

$5,400 for academic year 2008–2009;

(iii)

$5,700 for academic year 2009–2010;

(iv)

$6,000 for academic year 2010–2011; and

(v)

$6,300 for academic year 2011–2012,

.

(c)

Additional funds

(1)

In general

For an academic year, there are authorized to be appropriated, and there are appropriated, to carry out paragraph (2) (in addition to any other amounts appropriated to carry out section 401 of the Higher Education Act of 1965 (20 U.S.C. 1070a) and out of any money in the Treasury not otherwise appropriated) as follows:

(A)

For academic year 2007–2008, $4,331,000,000.

(B)

For academic year 2008–2009, $5,674,000,000.

(C)

For academic year 2009–2010, $7,050,000,000.

(D)

For academic year 2010–2011, $8,452,000,000.

(E)

For academic year 2011–2012, $9,894,000,000.

(2)

Increase in Pell grants

The amounts made available pursuant to paragraph (1) shall be used to increase the amount of the maximum Federal Pell Grant under section 401 of the Higher Education Act of 1965 (20 U.S.C. 1070a) for which funds are appropriated under appropriations Acts for a fiscal year by—

(A)

$1,050 for award year 2007–2008;

(B)

$1,350 for award year 2008–2009;

(C)

$1,650 for award year 2009–2010;

(D)

$1,950 for award year 2010–2011; and

(E)

$2,250 for award year 2011–2012.

3.

Student aid reward program

Part G of title IV of the Higher Education Act of 1965 (20 U.S.C. 1088 et seq.) is amended by inserting after section 489 the following:

489A.

Student aid reward program

(a)

Program authorized

The Secretary shall carry out a Student Aid Reward Program to encourage institutions of higher education to participate in the student loan program under this title that is most cost-effective for taxpayers.

(b)

Program requirements

In carrying out the Student Aid Reward Program, the Secretary shall—

(1)

provide to each institution of higher education participating in the student loan program under this title that is most cost-effective for taxpayers, a Student Aid Reward Payment, in an amount determined in accordance with subsection (c), to encourage the institution to participate in that student loan program;

(2)

require each institution of higher education receiving a payment under this section to provide student loans under such student loan program for a period of 5 years after the date the first payment is made under this section;

(3)

where appropriate, require that funds paid to institutions of higher education under this section be used to award students a supplement to such students’ Federal Pell Grants under subpart 1 of part A;

(4)

permit such funds to also be used to award need-based grants to lower- and middle-income graduate students; and

(5)

encourage all institutions of higher education to participate in the Student Aid Reward Program under this section.

(c)

Amount

The amount of a Student Aid Reward Payment under this section shall be not less than 50 percent of the savings to the Federal Government generated by the institution of higher education’s participation in the student loan program under this title that is most cost-effective for taxpayers instead of the institution’s participation in the student loan program that is not most cost-effective for taxpayers.

(d)

Trigger To ensure cost neutrality

(1)

Limit to ensure cost neutrality

Notwithstanding subsection (c), the Secretary shall not distribute Student Aid Reward Payments under the Student Aid Reward Program that, in the aggregate, exceed the Federal savings resulting from the implementation of the Student Aid Reward Program.

(2)

Federal savings

In calculating Federal savings, as used in paragraph (1), the Secretary shall determine Federal savings on loans made to students at institutions of higher education that participate in the student loan program under this title that is most cost-effective for taxpayers and that, on the date of enactment of this section, participated in the student loan program that is not most cost-effective for taxpayers, resulting from the difference of—

(A)

the Federal cost of loan volume made under the student loan program under this title that is most cost-effective for taxpayers; and

(B)

the Federal cost of an equivalent type and amount of loan volume made, insured, or guaranteed under the student loan program under this title that is not most cost-effective for taxpayers.

(3)

Distribution rules

If the Federal savings determined under paragraph (2) is not sufficient to distribute full Student Aid Reward Payments under the Student Aid Reward Program, the Secretary shall—

(A)

first make Student Aid Reward Payments to those institutions of higher education that participated in the student loan program under this title that is not most cost-effective for taxpayers on the date of enactment of this section; and

(B)

with any remaining Federal savings after making Student Aid Reward Payments under subparagraph (A), make Student Aid Reward Payments to the institutions of higher education eligible for a Student Aid Reward Payment and not described in subparagraph (A) on a pro-rata basis.

(4)

Distribution to students

Any institution of higher education that receives a Student Aid Reward Payment under this section—

(A)

shall distribute, where appropriate, part or all of such payment among the students of such institution who are Federal Pell Grant recipients by awarding such students a supplemental grant; and

(B)

may distribute part of such payment as a supplemental grant to graduate students in financial need.

(5)

Estimates, adjustments, and carry over

(A)

Estimates and adjustments

The Secretary shall make Student Aid Reward Payments to institutions of higher education on the basis of estimates, using the best data available at the beginning of an academic or fiscal year. If the Secretary determines thereafter that loan program costs for that academic or fiscal year were different than such estimate, the Secretary shall adjust by reducing or increasing subsequent Student Aid Reward Payments rewards paid to such institutions of higher education to reflect such difference.

(B)

Carry over

Any institution of higher education that receives a reduced Student Aid Reward Payment under paragraph (3)(B), shall remain eligible for the unpaid portion of such institution’s financial reward payment, as well as any additional financial reward payments for which the institution is otherwise eligible, in subsequent academic or fiscal years.

(e)

Definition

In this section:

(1)

Student loan program under this title that is most cost-effective for taxpayers

The term student loan program under this title that is most cost-effective for taxpayers means the loan program under part B or D of this title that has the lowest overall cost to the Federal Government (including administrative costs) for the loans authorized by such parts.

(2)

Student loan program under this title that is not most cost-effective for taxpayers

The term student loan program under this title that is not most cost-effective for taxpayers means the loan program under part B or D of this title that does not have the lowest overall cost to the Federal Government (including administrative costs) for the loans authorized by such parts.

.

4.

Interest rate reductions

(a)

FFEL Interest Rates

(1)

Section 427A(l) of the Higher Education Act of 1965 (20 U.S.C. 1077a(l)) is amended by adding at the end the following:

(4)

Reduced rates for undergraduate subsidized loans

Notwithstanding subsection (h) and paragraph (1) of this subsection, with respect to any loan to an undergraduate student made, insured, or guaranteed under this part (other than a loan made pursuant to section 428B, 428C, or 428H) for which the first disbursement is made on or after July 1, 2006, and before July 1, 2012, the applicable rate of interest shall be as follows:

(A)

For a loan for which the first disbursement is made on or after July 1, 2006, and before July 1, 2007, 6.8 percent on the unpaid principal balance of the loan.

(B)

For a loan for which the first disbursement is made on or after July 1, 2007, and before July 1, 2008, 6.12 percent on the unpaid principal balance of the loan.

(C)

For a loan for which the first disbursement is made on or after July 1, 2008, and before July 1, 2009, 5.44 percent on the unpaid principal balance of the loan.

(D)

For a loan for which the first disbursement is made on or after July 1, 2009, and before July 1, 2010, 4.76 percent on the unpaid principal balance of the loan.

(E)

For a loan for which the first disbursement is made on or after July 1, 2010, and before July 1, 2011, 4.08 percent on the unpaid principal balance of the loan.

(F)

For a loan for which the first disbursement is made on or after July 1, 2011, and before July 1, 2012, 3.40 percent on the unpaid principal balance of the loan.

.

(2)

Special allowance cross reference

Section 438(b)(2)(I)(ii)(II) of such Act is amended by striking section 427A(l)(1) and inserting section 427A(l)(1) or (l)(4).

(b)

Direct Loan interest rates

Section 455(b)(7) of the Higher Education Act of 1965 (20 U.S.C. 1087e(b)(7)) is amended by adding at the end the following:

(D)

Reduced rates for undergraduate FDSL

Notwithstanding the preceding paragraphs of this subsection, for Federal Direct Stafford Loans made to undergraduate students for which the first disbursement is made on or after July 1, 2006, and before July 1, 2012, the applicable rate of interest shall be as follows:

(i)

For a loan for which the first disbursement is made on or after July 1, 2006, and before July 1, 2007, 6.8 percent on the unpaid principal balance of the loan.

(ii)

For a loan for which the first disbursement is made on or after July 1, 2007, and before July 1, 2008, 6.12 percent on the unpaid principal balance of the loan.

(iii)

For a loan for which the first disbursement is made on or after July 1, 2008, and before July 1, 2009, 5.44 percent on the unpaid principal balance of the loan.

(iv)

For a loan for which the first disbursement is made on or after July 1, 2009, and before July 1, 2010, 4.76 percent on the unpaid principal balance of the loan.

(v)

For a loan for which the first disbursement is made on or after July 1, 2010, and before July 1, 2011, 4.08 percent on the unpaid principal balance of the loan.

(vi)

For a loan for which the first disbursement is made on or after July 1, 2011, and before July 1, 2012, 3.40 percent on the unpaid principal balance of the loan.

.

5.

Income contingent repayment for public sector employees

Section 455(e) of the Higher Education Act of 1965 (20 U.S.C. 1087e(e)) is amended by adding at the end the following:

(7)

Repayment plan for public sector employees

(A)

In general

The Secretary shall forgive the balance due on any loan made under this part or section 428C(b)(5) for a borrower—

(i)

who has made 120 payments on such loan pursuant to income contingent repayment; and

(ii)

who is employed, and was employed for the 10-year period in which the borrower made the 120 payments described in clause (i), in a public sector job.

(B)

Public sector job

In this paragraph, the term public sector job means a full-time job in emergency management, government, public safety, law enforcement, public health, education (including early childhood education), social work in a public child or family service agency, or public interest legal services (including prosecution or public defense).

(8)

Return to standard repayment

A borrower who is repaying a loan made under this part pursuant to income contingent repayment may choose, at any time, to terminate repayment pursuant to income contingent repayment and repay such loan under the standard repayment plan.

.

6.

Fair payment assurance

(a)

Amendment

Part G of title IV of the Higher Education Act of 1965 (20 U.S.C. 1088 et seq.) is further amended by adding at the end the following:

493C.

Fair payment assurance

(a)

Definitions

In this section:

(1)

Excepted PLUS loan

The term excepted PLUS loan means a loan under section 428B, or a Federal Direct PLUS Loan, that is made, insured, or guaranteed on behalf of a dependent student.

(2)

Partial financial hardship

The term partial financial hardship means the amount by which the annual amount due on the total amount of loans made, insured, or guaranteed under part B or D (other than an excepted PLUS loan) to a borrower as calculated under the standard repayment plan under section 428(b)(9)(A)(i) or 455(d)(1)(A) exceeds 15 percent of the result obtained by calculating the amount by which—

(A)

the borrower's adjusted gross income; exceeds

(B)

150 percent of the poverty line applicable to the borrower's family size as determined under section 673(2) of the Community Services Block Grant Act.

(b)

Fair payment assurance program authorized

Notwithstanding any other provision of this Act, the Secretary shall carry out a program under which—

(1)

a borrower of any loan made, insured or guaranteed under part B or D (other than an excepted PLUS loan) who has a partial financial hardship may elect, during any period the borrower has the partial financial hardship, to have the borrower's aggregate monthly payment for all such loans not exceed 15 percent of the result described in subsection (a)(2) divided by 12;

(2)

the holder of such a loan shall apply the borrower's monthly payment under this subsection first toward interest due on the loan and then toward the principal of the loan;

(3)

any interest due and not paid under paragraph (2)—

(A)

in the case of a Federal Stafford Loan or Federal Direct Stafford Loan, shall be paid by the Secretary; or

(B)

in the case of any other loan under part B or D (other than a loan described in subparagraph (A) or an excepted PLUS loan), shall be capitalized;

(4)

any principal due and not paid under paragraph (2) shall be deferred in the same manner as deferments under section 428(b)(1)(M);

(5)

the amount of time the borrower makes monthly payments under paragraph (1) may exceed 10 years;

(6)

if the borrower no longer has a partial financial hardship or no longer wishes to continue the election under this subsection, then—

(A)

the maximum monthly payment required to be paid for all loans made to the borrower under part B or D (other than an excepted PLUS loan) shall not exceed the monthly amount calculated under section 428(b)(9)(A)(i) or 455(d)(1)(A) when the borrower first made the election described in this subsection; and

(B)

the amount of time the borrower is permitted to repay such loans may exceed 10 years; and

(7)

the Secretary shall repay or cancel any outstanding balance of principal and interest due on all loans made under part B or D (other than an excepted PLUS Loan) to a borrower who—

(A)

is in deferment due to an economic hardship described in section 435(o) for a period of time prescribed by the Secretary, not to exceed 25 years; or

(B)(i)

makes the election under this subsection; and

(ii)

for a period of time prescribed by the Secretary, not to exceed 25 years (including any period during which the borrower is in deferment due to an economic hardship described in section 435(o)), meets any 1 or more of the following requirements:

(I)

Has made reduced monthly payments under paragraph (1).

(II)

Has made monthly payments of not less than the monthly amount calculated under section 428(b)(9)(A)(i) or 455(d)(1)(A) when the borrower first made the election described in this subsection.

(III)

Has made payments under a standard repayment plan under section 428(b)(9)(A)(i) or 455(d)(1)(A).

(IV)

Has made payments under an income contingent repayment plan under section 455(d)(1)(D).

.

(b)

Conforming ICR amendment

Section 455(d)(1)(D) of the Higher Education Act of 1965 (20 U.S.C. 1087e(d)(1)(D)) is amended by inserting made on behalf of a dependent student after PLUS loan.

7.

Definition of economic hardship

Section 435(o) of the Higher Education Act of 1965 (20 U.S.C. 1085(o)) is amended—

(1)

in paragraph (1)—

(A)

in subparagraph (A)(ii), by striking 100 percent of the poverty line for a family of 2 and inserting 150 percent of the poverty line applicable to the borrower's family size;

(B)

by striking subparagraph (B); and

(C)

by redesignating subparagraph (C) as subparagraph (B); and

(2)

in paragraph (2), by striking (1)(C) and inserting (1)(B).

8.

Deferrals

(a)

FISL

Section 427(a)(2)(C)(iii) of the Higher Education Act of 1965 (20 U.S.C. 1077(a)(2)(C)(iii)) is amended by striking not in excess of 3 years.

(b)

Interest subsidies

Section 428(b)(1)(M)(iv) of the Higher Education Act of 1965 (20 U.S.C. 1078(b)(1)(M)(iv)) is amended by striking not in excess of 3 years.

(c)

Direct loans

Section 455(f)(2)(D) of the Higher Education Act of 1965 (20 U.S.C. 1087e(f)(2)(D)) is amended by striking not in excess of 3 years.

(d)

Perkins

Section 464(c)(2)(A)(iv) of the Higher Education Act of 1965 (20 U.S.C. 1087dd(c)(2)(A)(iv)) is amended by striking not in excess of 3 years.

9.

Maximum repayment period

(a)

In general

Section 455(e) of the Higher Education Act of 1965 (20 U.S.C. 1087e(e)) is amended by adding at the end the following:

(7)

Maximum repayment period

In calculating the extended period of time for which an income contingent repayment plan under this subsection may be in effect for a borrower, the Secretary shall include all time periods during which a borrower of loans under part B, part D, or part E—

(A)

is not in default on any loan that is included in the income contingent repayment plan; and

(B)
(i)

is in deferment due to an economic hardship described in section 435(o);

(ii)

makes monthly payments under paragraph (1) or (6) of section 493C(b); or

(iii)

makes payments under a standard repayment plan described in section 428(b)(9)(A)(i) or subsection (d)(1)(A).

.

(b)

Technical correction

Section 455(d)(1)(C) (20 U.S.C. 1087e(d)(1)(C)) is amended by striking 428(b)(9)(A)(v) and inserting 428(b)(9)(A)(iv).

10.

In-school consolidation

Section 428(b)(7)(A) of the Higher Education Act of 1965 (20 U.S.C. 1078(b)(7)(A)) is amended by striking shall begin and all that follows through the period and inserting

shall begin—

(i)

the day after 6 months after the date the student ceases to carry at least one-half the normal full-time academic workload (as determined by the institution); or

(ii)

on an earlier date if the borrower requests and is granted a repayment schedule that provides for repayment to commence at an earlier date.

.

11.

Consolidation loan changes

Section 428C(a)(3) of the Higher Education Act of 1965 (20 U.S.C. 1078–3(a)(3)) is amended to read as follows:

(3)

Definition of eligible borrower

For the purpose of this section, the term eligible borrower means a borrower who—

(A)

is not subject to a judgment secured through litigation with respect to a loan under this title or to an order for wage garnishment under section 488A; and

(B)

at the time of application for a consolidation loan—

(i)

is in repayment status as determined under section 428(b)(7)(A);

(ii)

is in a grace period preceding repayment; or

(iii)

is a defaulted borrower who has made arrangements to repay the obligation on the defaulted loans satisfactory to the holders of the defaulted loans.

.

12.

Reduction of Direct Loan origination fees

Section 455(c) of the Higher Education Act of 1965 (20 U.S.C. 1087e(c)) is amended—

(1)

in paragraph (1)—

(A)

by striking 4.0 percent and inserting 3.0 percent; and

(B)

by striking shall and inserting is authorized to; and

(2)

in paragraph (2)—

(A)

in subparagraph (A), by striking 3.0 percent for 4.0 percent and inserting 2.0 percent for 3.0 percent;

(B)

in subparagraph (B), by striking 2.5 percent for 4.0 percent and inserting 1.5 percent for 3.0 percent;

(C)

in subparagraph (C), by striking 2.0 percent for 4.0 percent and inserting 1.0 percent for 3.0 percent;

(D)

in subparagraph (D), by striking 1.5 percent for 4.0 percent and inserting 0.5 percent for 3.0 percent; and

(E)

in subparagraph (E), by striking 1.0 percent for 4.0 percent and inserting 0.0 percent for 3.0 percent.

13.

Administrative account for direct loan program

Section 458 of the Higher Education Act of 1965 (20 U.S.C. 1087h) is amended—

(1)

in subsection (a)—

(A)

by striking paragraphs (2) and (3) and inserting the following:

(2)

Mandatory funds for fiscal years 2007 through 2011

Each fiscal year there shall be available to the Secretary, from funds not otherwise appropriated, funds to be obligated for—

(A)

administrative costs under this part and part B, including the costs of the direct student loan programs under this part; and

(B)

account maintenance fees payable to guaranty agencies under part B and calculated in accordance with subsection (b),

not to exceed (from such funds not otherwise appropriated) $904,000,000 (less any amounts previously appropriated for the costs and fees described this paragraph for fiscal year 2007) for fiscal year 2007, $943,000,000 for fiscal year 2008, $983,000,000 for fiscal year 2009, $1,023,000,000 for fiscal year 2010, $1,064,000,000 for fiscal year 2011, and $1,106,000,000 for fiscal year 2012.

;

(B)

by redesignating paragraphs (4) and (5) as paragraphs (3) and (4), respectively; and

(C)

in paragraph (3) (as redesignated in subparagraph (B)), by striking paragraph (3) and inserting paragraph (2); and

(2)

in subsection (b), by striking (a)(3) and inserting (a)(2).

14.

College tuition deduction and credit for interest on higher education loans

(a)

Expansion of deduction for higher education expenses

(1)

Amount of deduction

Subsection (b) of section 222 of the Internal Revenue Code of 1986 (relating to deduction for qualified tuition and related expenses) is amended to read as follows:

(b)

Limitations

(1)

Dollar limitations

(A)

In general

Except as provided in paragraph (2), the amount allowed as a deduction under subsection (a) with respect to the taxpayer for any taxable year shall not exceed the applicable dollar limit.

(B)

Applicable dollar limit

The applicable dollar limit for any taxable year shall be determined as follows:

Applicable
Taxable year:dollar amount:
2007$8,000
2008 and thereafter$12,000.
(2)

Limitation based on modified adjusted gross income

(A)

In general

The amount which would (but for this paragraph) be taken into account under subsection (a) shall be reduced (but not below zero) by the amount determined under subparagraph (B).

(B)

Amount of reduction

The amount determined under this subparagraph equals the amount which bears the same ratio to the amount which would be so taken into account as—

(i)

the excess of—

(I)

the taxpayer’s modified adjusted gross income for such taxable year, over

(II)

$65,000 ($130,000 in the case of a joint return), bears to

(ii)

$15,000 ($30,000 in the case of a joint return).

(C)

Modified adjusted gross income

For purposes of this paragraph, the term modified adjusted gross income means the adjusted gross income of the taxpayer for the taxable year determined—

(i)

without regard to this section and sections 199, 911, 931, and 933, and

(ii)

after the application of sections 86, 135, 137, 219, 221, and 469.

For purposes of the sections referred to in clause (ii), adjusted gross income shall be determined without regard to the deduction allowed under this section.
(D)

Inflation adjustments

(i)

In general

In the case of any taxable year beginning in a calendar year after 2007, both of the dollar amounts in subparagraph (B)(i)(II) shall be increased by an amount equal to—

(I)

such dollar amount, multiplied by

(II)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting calendar year 2006 for calendar year 1992 in subparagraph (B) thereof.

(ii)

Rounding

If any amount as adjusted under clause (i) is not a multiple of $50, such amount shall be rounded to the nearest multiple of $50.

.

(2)

Qualified tuition and related expenses of eligible students

(A)

In general

Section 222(a) of the Internal Revenue Code of 1986 (relating to allowance of deduction) is amended by inserting of eligible students after expenses.

(B)

Definition of eligible student

Section 222(d) of such Code (relating to definitions and special rules) is amended by redesignating paragraphs (2) through (6) as paragraphs (3) through (7), respectively, and by inserting after paragraph (1) the following new paragraph:

(2)

Eligible student

The term eligible student has the meaning given such term by section 25A(b)(3).

.

(3)

Deduction made permanent

Title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 (relating to sunset of provisions of such Act) shall not apply to the amendments made by section 431 of such Act.

(4)

Effective date

The amendments made by this subsection shall apply to payments made in taxable years beginning after December 31, 2006.

(b)

Credit for interest on higher education loans

(1)

In general

Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to nonrefundable personal credits) is amended by inserting after section 25D the following new section:

25E.

Interest on higher education loans

(a)

Allowance of credit

In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the interest paid by the taxpayer during the taxable year on any qualified education loan.

(b)

Maximum credit

(1)

In general

Except as provided in paragraph (2), the credit allowed by subsection (a) for the taxable year shall not exceed $1,500.

(2)

Limitation based on modified adjusted gross income

(A)

In general

If the modified adjusted gross income of the taxpayer for the taxable year exceeds $50,000 ($100,000 in the case of a joint return), the amount which would (but for this paragraph) be allowable as a credit under this section shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which would be so allowable as such excess bears to $20,000 ($40,000 in the case of a joint return).

(B)

Modified adjusted gross income

The term modified adjusted gross income means adjusted gross income determined without regard to sections 199, 222, 911, 931, and 933.

(C)

Inflation adjustment

In the case of any taxable year beginning after 2007, the $50,000 and $100,000 amounts referred to in subparagraph (A) shall be increased by an amount equal to—

(i)

such dollar amount, multiplied by

(ii)

the cost-of-living adjustment determined under section (1)(f)(3) for the calendar year in which the taxable year begins, by substituting 2006 for 1992.

(D)

Rounding

If any amount as adjusted under subparagraph (C) is not a multiple of $50, such amount shall be rounded to the nearest multiple of $50.

(c)

Dependents not eligible for credit

No credit shall be allowed by this section to an individual for the taxable year if a deduction under section 151 with respect to such individual is allowed to another taxpayer for the taxable year beginning in the calendar year in which such individual’s taxable year begins.

(d)

Limit on period credit allowed

A credit shall be allowed under this section only with respect to interest paid on any qualified education loan during the first 60 months (whether or not consecutive) in which interest payments are required. For purposes of this paragraph, any loan and all refinancings of such loan shall be treated as 1 loan.

(e)

Definitions

For purposes of this section—

(1)

Qualified education loan

The term qualified education loan has the meaning given such term by section 221(d)(1).

(2)

Dependent

The term dependent has the meaning given such term by section 152.

(f)

Special rules

(1)

Denial of double benefit

No credit shall be allowed under this section for any amount taken into account for any deduction under any other provision of this chapter.

(2)

Married couples must file joint return

If the taxpayer is married at the close of the taxable year, the credit shall be allowed under subsection (a) only if the taxpayer and the taxpayer’s spouse file a joint return for the taxable year.

(3)

Marital status

Marital status shall be determined in accordance with section 7703.

.

(2)

Conforming amendment

The table of sections for subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 25D the following new item:

Sec. 25E. Interest on higher education loans.

.

(3)

Effective date

The amendments made by this section shall apply to any qualified education loan (as defined in section 25E(e)(1) of the Internal Revenue Code of 1986, as added by this section) incurred on, before, or after the date of the enactment of this Act, but only with respect to any loan interest payment due after December 31, 2006.