To reduce certain special allowance payments and provide additional teacher loan forgiveness on Federal student loans.

Summary: Taxpayer-Teacher Protection Act of 2004 - (Sec. 2) Amends the Higher Education Act of 1965 (HEA) to reduce certain special allowance payments to holders of student loans. Sets a quarterly rate of special allowance for holders of loans that meet certain criteria. Includes among such criteria that such loans be: (1) financed through tax-exempt securities that have matured or been retired or defeased after September 30, 2004, and before January 1, 2006 (the period); (2) refinanced during the period with funds from another source; or (3) sold or transferred to any other holder during the period.

(Sec. 3) Revises HEA to require all teachers eligible for student loan forgiveness to be highly qualified, in keeping with requirements under the Elementary and Secondary Education Act of 1965 (ESEA). Exempts from this requirement teachers who have already begun their teaching service obligation under the current loan forgiveness program. States that such exemption shall not apply for purposes of obtaining certain increased amounts of student loan forgiveness.

Provides for such additional amounts of student loan forgiveness for certain eligible teachers of: (1) mathematics or science in secondary schools; and (2) special education in elementary and secondary schools. Increases to $17,500 the maximum amount of loan forgiveness for such teachers under the Federal Family Education Loan and the Federal Direct Student Loan programs (with the current maximum of $5,000 continuing to apply to eligible elementary and secondary teachers of other subjects).

Directs the Secretary to notify local educational agencies eligible to participate in the ESEA's Small Rural Achievement Program of the increased amounts of student loan forgiveness made available to certain teachers by this Act, and to encourage such agencies to notify their teachers of such benefits.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Taxpayer-Teacher Protection Act of 
2004''.

SEC. 2. REDUCTION OF SPECIAL ALLOWANCE PAYMENTS FOR LOANS FROM THE 
              PROCEEDS OF TAX EXEMPT ISSUES.

    Section 438(b)(2)(B) (20 U.S.C. 1087-1(b)(2)(B)) is amended--
        (1) in clause (i), by striking ``this division'' and inserting 
    ``this clause'';
        (2) in clause (ii), by striking ``division (i) of this 
    subparagraph'' and inserting ``clause (i) of this subparagraph'';
        (3) in clause (iv), by inserting ``or refunded after September 
    30, 2004, and before January 1, 2006,'' after ``October 1, 1993,''; 
    and
        (4) by adding at the end the following new clause:
        ``(v) Notwithstanding clauses (i) and (ii), the quarterly rate 
    of the special allowance shall be the rate determined under 
    subparagraph (A), (E), (F), (G), (H), or (I) of this paragraph, or 
    paragraph (4), as the case may be, for a holder of loans that--
            ``(I) were made or purchased with funds--
                ``(aa) obtained from the issuance of obligations the 
            income from which is excluded from gross income under the 
            Internal Revenue Code of 1986 and which obligations were 
            originally issued before October 1, 1993; or
                ``(bb) obtained from collections or default 
            reimbursements on, or interest or other income pertaining 
            to, eligible loans made or purchased with funds described 
            in division (aa), or from income on the investment of such 
            funds; and
            ``(II) are--
                ``(aa) financed by such an obligation that, after 
            September 30, 2004, and before January 1, 2006, has matured 
            or been retired or defeased;
                ``(bb) refinanced after September 30, 2004, and before 
            January 1, 2006, with funds obtained from a source other 
            than funds described in subclause (I) of this clause; or
                ``(cc) sold or transferred to any other holder after 
            September 30, 2004, and before January 1, 2006.''.

SEC. 3. LOAN FORGIVENESS FOR TEACHERS.

    (a) Implementing Highly Qualified Teacher Requirements.--
        (1) Amendments.--
            (A) FFEL loans.--Section 428J(b)(1) of the Higher Education 
        Act of 1965 (20 U.S.C. 1078-10(b)(1)) is amended--
                (i) in subparagraph (A), by inserting ``and'' after the 
            semicolon; and
                (ii) by striking subparagraphs (B) and (C) and 
            inserting the following:
            ``(B) if employed as an elementary school or secondary 
        school teacher, is highly qualified as defined in section 9101 
        of the Elementary Secondary Education Act of 1965; and''.
            (B) Direct loans.--Section 460(b)(1)(A) of such Act (20 
        U.S.C. 1087j(b)(1)(A)) is amended--
                (i) in clause (i), by inserting ``and'' after the 
            semicolon; and
                (ii) by striking clauses (ii) and (iii) and inserting 
            the following:
                ``(ii) if employed as an elementary school or secondary 
            school teacher, is highly qualified as defined in section 
            9101 of the Elementary and Secondary Education Act of 1965; 
            and''.
        (2) Transition rule.--
            (A) Rule.--The amendments made by paragraph (1) of this 
        subsection to sections 428J(b)(1) and 460(b)(1)(A) of the 
        Higher Education Act of 1965 shall not be applied to disqualify 
        any individual who, before the date of enactment of this Act, 
        commenced service that met and continues to meet the 
        requirements of such sections as such sections were in effect 
        on the day before the date of enactment of this Act.
            (B) Rule not applicable to increased qualified loan 
        amounts.--Subparagraph (A) of this paragraph shall not apply 
        for purposes of obtaining increased qualified loan amounts 
        under sections 428J(c)(3) and 460(c)(3) of the Higher Education 
        Act of 1965 as added by subsection (b) of this section.
    (b) Additional Amounts Eligible to Be Repaid.--
        (1) FFEL loans.--Section 428J(c) of the Higher Education Act of 
    1965 (20 U.S.C. 1078-10(c)) is amended by adding at the end the 
    following:
        ``(3) Additional amounts for teachers in mathematics, science, 
    or special education.--Notwithstanding the amount specified in 
    paragraph (1), the aggregate amount that the Secretary shall repay 
    under this section shall be not more than $17,500 in the case of--
            ``(A) a secondary school teacher--
                ``(i) who meets the requirements of subsection (b); and
                ``(ii) whose qualifying employment for purposes of such 
            subsection is teaching mathematics or science on a full-
            time basis; and
            ``(B) an elementary school or secondary school teacher--
                ``(i) who meets the requirements of subsection (b);
                ``(ii) whose qualifying employment for purposes of such 
            subsection is as a special education teacher whose primary 
            responsibility is to provide special education to children 
            with disabilities (as those terms are defined in section 
            602 of the Individuals with Disabilities Education Act); 
            and
                ``(iii) who, as certified by the chief administrative 
            officer of the public or non-profit private elementary 
            school or secondary school in which the borrower is 
            employed, is teaching children with disabilities that 
            correspond with the borrower's special education training 
            and has demonstrated knowledge and teaching skills in the 
            content areas of the elementary school or secondary school 
            curriculum that the borrower is teaching.''.
        (2) Direct loans.--Section 460(c) of the Higher Education Act 
    of 1965 (20 U.S.C. 1087j(c)) is amended by adding at the end the 
    following:
        ``(3) Additional amounts for teachers in mathematics, science, 
    or special education.--Notwithstanding the amount specified in 
    paragraph (1), the aggregate amount that the Secretary shall cancel 
    under this section shall be not more than $17,500 in the case of--
            ``(A) a secondary school teacher--
                ``(i) who meets the requirements of subsection (b)(1); 
            and
                ``(ii) whose qualifying employment for purposes of such 
            subsection is teaching mathematics or science on a full-
            time basis; and
            ``(B) an elementary school or secondary school teacher--
                ``(i) who meets the requirements of subsection (b)(1);
                ``(ii) whose qualifying employment for purposes of such 
            subsection is as a special education teacher whose primary 
            responsibility is to provide special education to children 
            with disabilities (as those terms are defined in section 
            602 of the Individuals with Disabilities Education Act); 
            and
                ``(iii) who, as certified by the chief administrative 
            officer of the public or non-profit private elementary 
            school or secondary school in which the borrower is 
            employed, is teaching children with disabilities that 
            correspond with the borrower's special education training 
            and has demonstrated knowledge and teaching skills in the 
            content areas of the elementary school or secondary school 
            curriculum that the borrower is teaching.''.
        (3) Effective date.--The amendments made by this subsection 
    shall apply only with respect to eligible individuals who are new 
    borrowers (as such term is defined in 103 of the Higher Education 
    Act of 1965 (20 U.S.C. 1003)) on or after October 1, 1998, and 
    before October 1, 2005.
    (c) Information on Benefits to Rural School Districts.--The 
Secretary shall--
        (1) notify local educational agencies eligible to participate 
    in the Small Rural Achievement Program authorized under subpart 1 
    of part B of title VI of the Elementary and Secondary Education Act 
    of 1965 of the benefits available under the amendments made by this 
    section; and
        (2) encourage such agencies to notify their teachers of such 
    benefits.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.