SECTION 1. CREDIT FOR INTEREST ON EDUCATION LOANS.

    (a) 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 22 the 
following new section:

``SEC. 23. INTEREST ON EDUCATION LOANS.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as credit against the tax imposed by this chapter for 
the taxable year an amount equal to 15 percent of the interest paid by 
the taxpayer during the taxable year on any qualified education loan.
    ``(b) Maximum Credit.--The credit allowed by subsection (a) for the 
taxable year shall not exceed $300.
    ``(c) Limitation on Taxpayers 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.--
            ``(1) Taxpayer and taxpayer's spouse.--Except as provided 
        in paragraph (2), a credit shall be allowed under this section 
        only with respect to interest paid on any qualified education 
        loan during the first 48 months (whether or not consecutive) in 
        which interest payments are required. For purposes of this 
        paragraph, any loan and refinancings of such loans shall be 
        treated as one loan.
            ``(2) Dependent.--If the qualified education loan was used 
        to pay education expenses of an individual other than the 
        taxpayer of the taxpayer's spouse, a credit shall be allowed 
        under this section for any taxable year with respect to such 
        loan only if a deduction under section 151 with respect to such 
        individual is allowed to the taxpayer for such taxable year.
    ``(e) Phaseout of Benefit.--
            ``(1) In general.--The amount of interest which would (but 
        for this subparagraph) be taken into account under paragraph 
        (a) for the taxable year shall be reduced (but not below zero) 
        by the amount which bears the same ratio to such interest as 
        the excess of the taxpayer's adjusted gross income for such 
        taxable year over the applicable dollar amount bears to 
        phaseout range.
            ``(2) Applicable dollar amount; phaseout range.--For 
        purposes of subparagraph (1)--
                    ``(A) in the case of a return of an unmarried 
                individual, the applicable dollar amount is $40,000 and 
                the phaseout range is $15,000,
                    ``(B) in the case of joint return, the applicable 
                dollar amount is $60,000 and the phaseout range is 
                $30,000, and
                    ``(C) in the case of a married individual filing a 
                separate return, the applicable dollar amount is 
                $30,000 and the phaseout range is $15,000.
    ``(f) Definitions.--For purposes of this section--
            ``(1) Qualified education loan.--The term `qualified 
        education loan' means any indebtedness incurred to pay 
        qualified higher education expenses--
                    ``(A) which are incurred on behalf of the taxpayer, 
                the taxpayer's spouse, or a dependent of the taxpayer,
                    ``(B) which are paid or incurred within a 
                reasonable period of time before or after the 
                indebtedness is incurred, and
                    ``(C) which are attributable to education furnished 
                during a period during which the recipient was at least 
                a half-time student.
Such term includes indebtedness used to refinance indebtedness which 
qualifies as a qualified education loan. The term `qualified education 
loan' shall not include any indebtedness owed to a person who is 
related (within the meaning of section 267(b) or 707(b)(1)) to the 
taxpayer.
            ``(2) Qualified higher education expenses.--The term 
        `qualified higher education expenses' means the cost of 
        attendance (as defined in section 472 of the Higher Education 
        Act of 1965, (section 1087ll of title 20 United States Code), 
        20 U.S.C. 1087 11, as in effect on the day before the date of 
        enactment of this Act) of the taxpayer, the taxpayer's spouse, 
        or a dependent of the taxpayer at an eligible educational 
        institution. For purposes of the preceding sentence, the term 
        `eligible educational institution' has the same meaning given 
        such term by section 135(c)(3), except that such term shall 
        also include an institution conducting an internship or 
        residency program leading to a degree or certificate awarded by 
        an institution of higher education, a hospital, or a health 
        care facility which offers postgraduate training.
            ``(3) Half-time student.--The term `half-time student' 
        means any individual who would be a student as defined in 
        section 151(c)(4) if `half-time' were substituted for `full-
        time' each place it appears in such section.
            ``(4) Dependent.--The term `dependent' has the meaning 
        given such term by section 152.
    ``(g) Special Rules.--
            ``(1) Denial of double benefit.--No credit shall be allowed 
        under this section for any amount for which a deduction is 
        allowable under any other provision of this chapter.
            ``(2) Marital status.--Marital status shall be determined 
        in accordance with section 7703.''
    (b) Optional Deduction for Interest on Education Loans.--Paragraph 
(2) of section 163(h) of the Internal Revenue Code of 1986 (defining 
personal interest) is amended by striking ``and'' at the end of 
subparagraph (D), by redesignating subparagraph (E) as subparagraph 
(F), and by inserting after subparagraph (D) the following new 
subparagraph:
                    ``(E) any interest paid on a qualified education 
                loan (as defined in section 23(f)) during the period 
                described in section 23(d) and subject to the income 
                limitations described in section 23(e), unless a credit 
                or deduction is taken with respect to such interest 
                under any other provisions of this chapter, and''.
    (c) Clerical Amendment.--The table of sections for such subpart A 
is amended by inserting after the item relating to section 22 the 
following new item:

``Section 23. Interest on education loans.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993, but only with 
respect to loans the first required payment on which is after such 
date.
Amends the Internal Revenue Code to allow a tax credit for interest paid or incurred on any qualified education loan during the first 48 months (whether or not consecutive) for which interest payments are required to be made.  Limits such credit to $300. 
Allows such tax credit to parents only if the dependent is a student and a personal exemption is claimed for such dependent student. 
Reduces interest by the amount bearing the same ratio to the interest as the excess of adjusted gross income over the applicable dollar amount bears to the phaseout range.  Establishes applicable dollar amounts and phaseout ranges. 
Excludes interest paid on education loans from the definition of "personal interest" (thus, allowing a deduction to be taken) unless a credit or deduction with respect to such interest is taken.
To amend the Internal Revenue Code of 1986 to allow a credit or deduction for interest paid on education loans.