SECTION 1. SHORT TITLE.

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

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

    Section 438(b)(2)(B) of the Higher Education Act of 1965 (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 on or after 
        October 1, 2004 and before October 1, 2005,'' 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 interests 
                                        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) were--
                                            ``(aa) financed by such an 
                                        obligation that has matured, or 
                                        been retired or defeased;
                                            ``(bb) refinanced on or 
                                        after October 1, 2004 and 
                                        before October 1, 2005, 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 on or after 
                                        October 1, 2004 and before 
                                        October 1, 2005.''.

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 the 
                Higher Education Act of 1965 (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 
                        corresponds 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 
                        corresponds 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 on or after October 1, 1998, and before October 
        1, 2005.
Taxpayer-Teacher Protection Act of 2004 - Amends the Higher Education Act of 1965 to: (1) reduce certain special allowance payments to holders of student loans; and (2) provide for additional amounts of student loan forgiveness for certain elementary or secondary school teachers of mathematics, science, or special education.
A bill to reduce the special allowance for loans from the proceeds of tax exempt issues, and to provide additional loan forgiveness for teachers who teach mathematics, science, or special education.