I 

109TH CONGRESS 

1ST SESSION H. R. 2666

To amend the Internal Revenue Code of 1986 to modify the determination 

and deduction of interest on qualified education loans. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 26, 2005

Mr. ENGLISH of Pennsylvania introduced the following bill; which was referred 

to the Committee on Ways and Means 

A BILL

To amend the Internal Revenue Code of 1986 to modify 

the determination and deduction of interest on qualified 

education loans.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. INTEREST DETERMINATIONS ON STUDENT 

4 LOANS. 

5 (a) IN GENERAL.—Section 221 of the Internal Rev6 enue Code of 1986 (relating to interest on education 

7 loans) is amended by redesignating subsection (f) as sub8 section (g) and by inserting after subsection (e) the fol9 lowing new subsection: 
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1 ‘‘(f) DETERMINATION OF INTEREST PAID.—In the 

2 case of a qualified education loan initially disbursed after 

3 December 31, 2004, for purposes of this section and not4 withstanding any other provision of this title—

5 ‘‘(1) IN GENERAL.—

6 ‘‘(A) TREATMENT AS INTEREST.—A loan 

7 payment on such loan shall be treated as a pay8 ment of interest to the extent of the balance, 

9 immediately before such payment, in the accu10 mulated interest account with respect to such 

11 loan. 

12 ‘‘(B) EXCEPTION.—Subparagraph (A) 

13 shall not apply to any payment of collection 

14 costs, late fees, and penalties. 

15 ‘‘(2) ACCUMULATED INTEREST ACCOUNT.—

16 ‘‘(A) IN GENERAL.—The term ‘accumu17 lated interest account’ means an account which 

18 is adjusted in accordance with this paragraph. 

19 ‘‘(B) INCREASES.—The balance in the ac20 cumulated interest account shall be increased 

21 for any period by the sum of—

22 ‘‘(i) the loan origination fees incurred 

23 by the borrower in such period, and 

24 ‘‘(ii) the amount of stated interest on 

25 the loan for such period. 
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1 ‘‘(C) DECREASES.—The balance in the ac2 cumulated interest account shall be decreased 

3 (but not below zero) by payments made on the 

4 loan to the extent treated as interest under this 

5 section. 

6 ‘‘(3) LOAN ORIGINATION FEES.—

7 ‘‘(A) FEDERAL PROGRAMS.—The term 

8 ‘loan origination fee’ includes any fee imposed 

9 under any of the following provisions of the 

10 Higher Education Act of 1965: 

11 ‘‘(i) Section 438(c) (20 U.S.C. 1087–

12 1(c)). 

13 ‘‘(ii) Section 428(b)(1)(H) (20 U.S.C. 

14 1078(b)(1)(H)). 

15 ‘‘(iii) Section 455(c) (20 U.S.C. 

16 1087e(c)). 

17 ‘‘(B) FEES FOR SERVICES OR PROPERTY

18 EXCLUDED.—Except as provided under sub19 paragraph (A), the term ‘loan origination fee’ 

20 does not include any fee which is a fee for serv21 ices or property. 

22 ‘‘(4) ANTI-ABUSE RULE.—The Secretary may 

23 prescribe rules to prevent the acceleration of addi24 tions to the accumulated interest account where the 
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1 loan origination fees or stated interest do not prop2 erly reflect the substance of the loan.’’. 

3 (b) INFORMATION RETURNS.—

4 (1) INTEREST AND LOAN ORIGINATION FEE DE5 FINED.—Subsection (e) of section 6050S of such 

6 Code (relating to general rule for form and manner 

7 of returns) is amended by inserting before the period 

8 at the end the following: ‘‘, and the term ‘interest’ 

9 has the same meaning as when used in section 221’’. 

10 (2) PRE-2005 LOANS.—The regulations under 

11 section 6050S of the Internal Revenue Code of 1986 

12 which are applicable to loans made before September 

13 1, 2004, shall also apply to loans made on or after 

14 such date which are initially disbursed before Janu15 ary 1, 2005. 

16 (c) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to taxable years beginning after 

18 December 31, 2004.

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