To amend title 38, United States Code, to improve benefits under the Montgomery GI Bill by establishing an enhanced educational assistance program, by increasing the amount of basic educational assistance, by repealing the requirement for reduction in pay for participation in the program, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Montgomery GI Bill Improvements Act 
of 2003''.

SEC. 2. ENHANCED BENEFITS UNDER MONTGOMERY GI BILL FOR FOUR YEARS OF 
              ACTIVE-DUTY SERVICE.

    (a) In General.--Chapter 30 of title 38, United States Code, is 
amended by adding at the end the following new subchapter:
    ``SUBCHAPTER V--ENHANCED EDUCATIONAL ASSISTANCE
``Sec. 3041. Enhanced educational assistance entitlement
    ``(a) Entitlement.--An eligible individual is entitled to enhanced 
educational assistance under this subchapter.
    ``(b) Eligible Individual Defined.--(1) For purposes of this 
subchapter, the term `eligible individual' means an individual who 
meets the service requirement described in subsection (c) and whose 
status after completion of such service is described in section 
3011(a)(3) of this title (relating to continuation on active duty, 
honorable discharge, or honorable service, as the case may be).
    ``(2) Such term does not include an individual described in 
paragraph (1) or (2) of section 3011(c) of this title (relating to 
individuals not electing basic educational assistance under subchapter 
II of this chapter or certain commissioned officers, respectively).
    ``(c) Service Requirement.--(1) The service requirement referred to 
in subsection (b) is as follows:
            ``(A) After September 30, 2003, the individual--
                    ``(i) first enters on active duty;
                    ``(ii) reenlists or extends an enlistment on active 
                duty as a member of the Armed Forces; or
                    ``(iii) in the case of an officer, continues to 
                serve on active duty after that date.
            ``(B) From the date of such entry, reenlistment, extension, 
        or continuation, as the case may be, the individual--
                    ``(i) serves a continuous period of active duty of 
                at least four years in the Armed Forces; or
                    ``(ii) serves on active duty in the Armed Forces 
                and is discharged or released from active duty--
                            ``(I) as provided in subclause (I) of 
                        section 3011(a)(1)(A)(ii) of this title 
                        (relating to service-connected disabilities and 
                        other medical conditions);
                            ``(II) for the convenience of the 
                        Government, after having completed not less 
                        than 42 months of continuous active duty; or
                            ``(III) as provided in subclause (III) of 
                        section 3011(a)(1)(A)(ii) of this title 
                        (relating to involuntary discharge or release 
                        for the convenience of the Government as a 
                        result of a reduction in force).
    ``(2) In determining service under paragraph (1), the following 
rules apply:
            ``(A) Any period of service described in paragraph (2) or 
        (3) of section 3011(d) of this title (relating to periods of 
        service terminated because of a defective enlistment and 
        periods of service on active duty which individuals in the 
        Selected Reserve were ordered to perform under certain 
        provisions of chapter 1209 of title 10, respectively) that 
        applies to an eligible individual under this section shall not 
        be considered a part of the individual's period of active duty.
            ``(B) A member described in paragraph (2) of section 
        3011(f) of this title (relating to certain members discharged 
        or released who subsequently reenlist or re-enter on a period 
        of active duty) who serves the periods of active duty referred 
        to in such paragraph shall be deemed to have served a 
        continuous period of active duty the length of which is the 
        aggregate length of the periods of active duty referred to in 
        such paragraph.
            ``(C) Subsections (g) and (h) of section 3011 of this title 
        (relating to assignment full time at a civilian institution for 
        courses of education and to commencement of courses of 
        education at a service academy, respectively) apply with 
        respect to an eligible individual under this section in the 
        same manner as they apply to an individual under section 3011 
        of this title.
    ``(d) Election of Basic Educational Assistance.--(1) An eligible 
individual entitled to enhanced educational assistance under this 
subchapter may elect (in a form and manner prescribed by the Secretary) 
to receive basic educational assistance under subchapter II in lieu of 
such enhanced educational assistance for an enrollment period. Such an 
election shall be made by not later than 30 days before the beginning 
of the enrollment period.
    ``(2) An eligible individual may revoke an election made pursuant 
to paragraph (1), but in no case may such revocation be made later than 
30 days before the beginning of the enrollment period.
``Sec. 3042. Duration of enhanced educational assistance
    ``(a) In General.--Subject to section 3695 of this title and except 
as provided in subsection (b), each individual entitled to enhanced 
educational assistance under section 3041 of this title is entitled to 
a monthly enhanced educational assistance allowance under this 
subchapter for a period or periods not to exceed a total of 36 months 
(or the equivalent thereof in part-time enhanced educational 
assistance).
    ``(b) Special Rule for Certain Early Separations.--Subject to 
section 3695 of this title, in the case of an individual described in 
subclause (I) or (III) of section 3041(c)(1)(B)(ii) of this title 
(relating to individuals discharged for service-connected disabilities 
or medical conditions or whose service is involuntarily terminated for 
the convenience of the Government as a result of a reduction in force, 
respectively) who does not serve a continuous period of active duty of 
at least four years in the Armed Forces (as described in section 
3041(c)(1)(B)(i) of this title), the individual is entitled to one 
month of enhanced educational assistance benefits under this subchapter 
(not to exceed a total of 36 months (or the equivalent thereof in part-
time enhanced educational assistance)) for each month of continuous 
active duty served by the individual beginning with the date on which 
the entry on active duty, reenlistment, enlistment extension, or 
continuation applicable to that individual under section 3041(c)(1)(A) 
of this title begins.
``Sec. 3043. Payment of educational expenses
    ``(a) In General.--(1) Subject to paragraph (2), the Secretary 
shall pay to the educational institution providing a course under an 
approved program of education to an eligible individual under this 
subchapter who is enrolled in the course the actual cost of tuition and 
fees otherwise payable by the individual.
    ``(2) Such cost may not exceed the amount charged to nonveterans in 
similar circumstances.
    ``(b) Stipend; Costs of Books and Supplies.--The Secretary shall 
pay to each eligible individual under this subchapter who is pursuing 
an approved program of education--
            ``(1) a stipend as provided in section 3044 of this title; 
        and
            ``(2) in accordance with regulations prescribed by the 
        Secretary, an amount equal to the average cost, for the year 
        involved, of books and supplies payable by individuals pursuing 
        courses of education at educational institutions.
``Sec. 3044. Amount of stipend
    ``(a) In General.--Except as provided in section 3042 of this 
title, the stipend under this subchapter shall be paid at a monthly 
rate (as that rate may be increased pursuant to subsection (b)) as 
follows:
            ``(1) At the monthly rate of $900 for an approved program 
        of education pursued on a full-time basis.
            ``(2) At the monthly rate of $700 for an approved program 
        of education pursued on a three-quarter-time basis.
            ``(3) At the monthly rate of $500 for an approved program 
        of education pursued on a half-time basis.
            ``(4) At the monthly rate of $300 for an approved program 
        of education pursued on less than a half-time basis.
    ``(b) Adjustment for Inflation.--With respect to any fiscal year 
beginning after fiscal year 2004, the Secretary shall provide a 
percentage increase (rounded to the nearest dollar) in the rates 
payable under subsection (a) equal to the percentage by which--
            ``(1) the Consumer Price Index (all items, United States 
        city average) for the 12-month period ending on the June 30 
        preceding the beginning of the fiscal year for which the 
        increase is made, exceeds
            ``(2) such Consumer Price Index for the 12-month period 
        preceding the 12-month period described in paragraph (1).''.
    (b) Conforming Amendments.--(1) Section 3002 of such title is 
amended by inserting at the end the following new paragraph:
    ``(9) The term `enhanced educational assistance' means educational 
assistance provided under subchapter V.''.
    (2) Section 3011 of such title is amended in subsection (f)(1) and 
(g) by striking ``chapter'' each place it appears and inserting 
``subchapter''.
    (3) Section 3018A(a) of such title is amended by striking 
``education assistance under this chapter'' and inserting ``educational 
assistance under this subchapter''.
    (4) Section 3018B of such title is amended by striking ``education 
assistance under this chapter'' each place it appears and inserting 
``educational assistance under this subchapter''.
    (5) Section 3018C of such title is amended by striking 
``educational assistance under this chapter'' each place it appears and 
inserting ``educational assistance under this subchapter''.
    (6) Section 3019 of such title is amended by striking ``chapter'' 
each place it appears and inserting ``subchapter''.
    (7) Section 3031 of such title is amended--
            (A) in subsection (f), by inserting ``or 3042 of this 
        title'' after ``section 3013'' each place it appears; and
            (B) in subsection (g), by inserting ``or 
        3031(c)(1)(B)(ii)(III)'' after ``section 
        3011(a)(1)(A)(ii)(III)''.
    (8) Section 3032(e)(3) of such title is amended by inserting ``, or 
section 3044(a)(1)'' after ``section 3015''.
    (c) Clerical Amendment.--The table of sections at the beginning of 
chapter 30 of title 38, United States Code, is amended by adding at the 
end the following new items:

            ``SUBCHAPTER V--ENHANCED EDUCATIONAL ASSISTANCE

``3041. Enhanced educational assistance entitlement.
``3042. Duration of enhanced educational assistance.
``3043. Payment of educational expenses.
``3044. Amount of stipend.''.

SEC. 3. INCREASE IN RATES OF BASIC EDUCATIONAL ASSISTANCE UNDER 
              MONTGOMERY GI BILL.

    (a) Rates for Basic Educational Assistance.--Section 3015 of title 
38, United States Code, is amended--
            (1) in subsection (a)(1)(C), by striking ``$985'' and 
        inserting ``1,200''; and
            (2) in subsection (b)(1)(C), by striking ``$800'' and 
        inserting ``$950''.
    (b) Application of Index Based on Costs of Higher Learning.--
Section 3015(h) of such title is amended to read as follows:
    ``(h)(1) With respect to any fiscal year, the Secretary shall 
provide a percentage increase (rounded to the nearest dollar) in the 
rates payable under subsections (a)(1) and (b)(1) equal to the 
percentage (as determined by the Secretary) by which--
            ``(A) the average monthly costs of tuition and expenses for 
        commuter students at public institutions of higher learning 
        that award baccalaureate degrees for purposes of subsections 
        (a)(1) and (b)(1) for the fiscal year involved, exceeds
            ``(B) such average monthly costs for the preceding fiscal 
        year.
    ``(2) The Secretary shall make the determination under paragraph 
(1) after consultation with the Secretary of Education.
    ``(3) A determination made under paragraph (1) in a year shall take 
effect on October 1 of that year and apply with respect to basic 
educational assistance allowances payable under this section for the 
fiscal year beginning in that year.
    ``(4) Not later than September 30 each year, the Secretary shall 
publish in the Federal Register the average monthly costs of tuition 
and expenses as determined under paragraph (1) in that year.''.
    (c) Effective Dates.--(1) The amendments made by subsection (a) 
shall apply with respect to payments for months beginning after 
September 30, 2003.
    (2) The amendment made by subsection (b) shall apply to payments 
for months beginning after September 20, 2004.

SEC. 4. REPEAL OF PAY REDUCTION AND HIGH SCHOOL GRADUATION REQUIREMENT 
              FOR PARTICIPATION IN BASIC EDUCATIONAL ASSISTANCE UNDER 
              MONTGOMERY GI BILL.

    (a) Repeal of Pay Reduction and Election of Benefits.--(1) Section 
3011 of title 38, United States Code, is amended--
            (A) by striking subsection (b); and
            (B) in subsection (c), by striking paragraph (1) and 
        redesignating paragraphs (2) and (3) as paragraphs (1) and (2), 
        respectively.
    (2) Section 3012 of such title is amended--
            (A) by striking subsection (c); and
            (B) in subsection (d), by striking paragraph (1) and 
        redesignating paragraphs (2) and (3) as paragraphs (1) and (2), 
        respectively.
    (3) Section 3016(a)(1) of such title is amended by striking ``, and 
does not make an election under section 3011(c)(1) or section 
3012(d)(1)''.
    (4) The amendments made by this subsection shall take effect on 
October 1, 2003, and apply to individuals whose initial obligated 
period of active duty under section 3011 or 3012 of title 38, United 
States Code, as the case may be, begins on or after such date.
    (5) Any reduction in the basic pay of an individual referred to in 
subsection (b) of section 3011 of title 38, United States Code, by 
reason of such subsection, or of any individual referred to in 
subsection (c) of section 3012 of such title by reason of such 
subsection, shall cease commencing with months beginning after 
September 30, 2003, and any obligation of such individual under such 
subsections, as the case may be, as of September 30, 2003, shall be 
deemed to be fully satisfied as of such date.
    (b) Repeal of High School Graduation Requirement.--(1) Section 
3011(a) of title 38, United States Code, is amended--
            (A) by striking paragraph (2); and
            (B) by redesignating paragraph (3) as paragraph (2).
    (2) Section 3012(a) of such title is amended--
            (A) by striking paragraph (2); and
            (B) by redesignating paragraph (3) as paragraph (2).
    (3) Section 3018(b) of such title is amended--
            (A) by striking paragraph (4);
            (B) by inserting ``and'' at the end of paragraph (3)(C); 
        and
            (C) by redesignating paragraph (5) as paragraph (4).
    (4) The amendments made by this subsection shall take effect on the 
date of the enactment of this Act and apply with respect to individuals 
applying for basic educational assistance under chapter 30 of title 38, 
United States Code, on or after such date.
    (c) Exclusion From Income for Eligibility Determinations for 
Federal Educational Loans.--Section 3015 of such title is amended--
            (1) by redesignating subsection (h), as amended in section 
        3(b), as subsection (i); and
            (2) by inserting after subsection (g) the following new 
        subsection:
    ``(h) Exclusion From Income for Eligibility Determinations for 
Federal Educational Loans.--Notwithstanding any other provision of law, 
amounts payable by the Secretary under this subchapter with respect to 
an eligible individual shall not be considered as income for purposes 
of determining eligibility of such individual for education grants or 
loans under any other provision of Federal law.''.

Summary: Montgomery GI Bill Improvements Act of 2003 - Amends Federal basic educational assistance provisions to authorize enhanced educational assistance to a member of the armed forces who, after September 30, 2003: (1) first enters on active duty, (2) reenlists or continues to serve on active duty. (3) serves a continuous period of active duty of four years. Or (4) serves and is discharged or released for a service-connected disability, at the convenience of the Government , or due to a reduction in force. Limits to 36 months the period for such enhanced assistance. Requires the payment of educational expenses under such program. Provides a monthly stipend for approved programs of education. Increases the rates of basic educational assistance. Repeals, with respect to such assistance: (1) a required monthly reduction in pay for individuals who do not elect to participate in such assistance program. (2) a provision authorizing individuals to elect not to receive such assistance. And (3) the requirement that participants complete the requirements of a high school diploma or equivalency certificate prior to the end of their initial obligated period of service in order to be eligible to receive such assistance. Excludes educational assistance payments from income for purposes of eligibility for Federal educational loans.