(1) Increasing the percentage of individuals who 
obtain a postsecondary education has become in-
creasingly important, not just to the individual bene-
ficiary, but to the Nation as a whole. The growth 
and continued expansion of the Nation’s economy is 
heavily dependent on an educated and highly skilled 
workforce. 
(2) The opportunity to gain a postsecondary 
education also is important to the Nation as a 
means to help advance the American ideals of 
progress and equality. 
(3) The Federal Government plays an invalu-
able role in making student financial aid available to 
ensure that qualified students are able to attend col-
lege, regardless of their financial means. Since the 
inception of the Pell Grant program in 1973, nearly 
80,000,000 grants have helped low- and middle-in-
come students go to college, enrich their lives, and 
become productive members of society. 
(4) Nationwide, almost 63 percent of secondary 
school graduates continue on to higher education im-
mediately after completing secondary school. This 
degree of college participation would not exist with-
out the Federal investment in student aid, especially 
the Pell Grant program. More than 4,000,000 low-
and middle-income students receive Pell Grants; 95 
percent of whom have a family income of not more 
than $40,000. 
(5) In the next 10 years, the number of under-
graduate students enrolled in the Nation’s colleges 
and universities will increase by 15 percent to more 
than 15,000,000 students. Many of these students 
will be the first in their families to attend college. 
The continued investment in the Pell Grant program 
is essential if college is to remain an achievable part 
of the American dream. 
(6) Increasing the maximum Pell Grant to 
$5,100 would allow more than 430,000 additional 
students to benefit from the program. 
(7) Increasing the maximum Pell Grant to 
$5,100 would result in 200,000 new Pell Grant re-
cipients. 
(8) Pell Grant recipients are more likely to 
graduate with student loan debt and to amass more 
debt than other student borrowers. Increasing the 
maximum Pell Grant to $5,100 will help remedy this 
disparity. 
(b) SENSE OF THE SENATE.—It is the sense of the 
Senate that—
(1) the maximum Pell Grant should be in-
creased to $5,100 during award year 2006–2007; 
and 
(2) the maximum Pell Grant amount set by 
Congress should be the amount eligible students re-
ceive. 
SEC. 803. ESTABLISHMENT OF A PELL DEMONSTRATION 
PROGRAM. 
(a) FINDINGS.—Congress finds that: 
(1) A student remains eligible to receive a Fed-
eral Pell Grant as long as the student is income-eli-
gible and has not received a bachelor’s degree. 
(2) By encouraging persistence and degree ac-
quisition in a timely manner, the Federal Govern-
ment, in effect, saves money— 
(A) by reducing the courses that do not 
lead to a degree; and 
(B) by helping students get the financial 
benefits of a college degree as soon as possible. 
(b) PELL DEMONSTRATION PROGRAM.— 
(1) AUTHORIZATION.—The Secretary of Edu-
cation shall establish a demonstration program to fa-
cilitate the ability of low-income students to com-
plete the students’ degree within 150 percent of the 
time expected to complete such degree.
(2) GRANTS.—The Secretary of Education shall 
award competitive grants to institutions of higher 
education to enable students who are eligible to re-
ceive Federal Pell Grants under subpart 1 of part A 
of title IV of the Higher Education Act of 1965 (20 
U.S.C. 1070a et seq.) to enroll in courses in the 
summer at such institutions to expedite the stu-
dents’ graduation from the institutions. 
(3) AUTHORIZATION
OF
APPROPRIATIONS.— 
There is authorized to be appropriated to carry out 
this subsection $500,000,000 for the period of fiscal 
years 2006 through 2008. 
TITLE IX—TUITION FREE COL-
LEGE 
FOR 
MATHEMATICS, 
SCIENCE, AND SPECIAL EDU-
CATION TEACHERS 
SEC. 901. PURPOSE. 
It is the purpose of this title to make public college 
tuition free for future mathematics, science, and special 
education teachers and to provide additional assistance to 
students eligible to receive a Federal Pell Grant under 
subpart 1 of part A of title IV of the Higher Education 
Act of 1965 (20 U.S.C. 1070a et seq.).
SEC. 902. TUITION FREE COLLEGE FOR MATHEMATICS, 
SCIENCE, AND SPECIAL EDUCATION TEACH-
ERS. 
(a) ADDITIONAL AMOUNTS FOR TEACHERS IN MATH-
EMATICS, SCIENCE, AND SPECIAL EDUCATION.— 
(1) FFEL LOANS.—Section 428J(c)(3) of the 
Higher Education Act of 1965 (20 U.S.C. 1078– 
10(c)(3)) is amended by striking ‘‘$17,500’’ and in-
serting ‘‘$23,000’’. 
(2) DIRECT LOANS.—Section 460(c)(3) of the 
Higher 
Education 
Act 
of 
1965 
(20 
U.S.C. 
1087j(c)(3)) is amended by striking ‘‘$17,500’’ and 
inserting ‘‘$23,000’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply only with respect to eligible individ-
uals who are new borrowers on or after October 1, 1998. 
SEC. 903. OFFSET FOR TUITION FREE COLLEGE FOR MATH-
EMATICS, 
SCIENCE, 
AND 
SPECIAL 
EDU-
CATION TEACHERS. 
(a) SPECIAL ALLOWANCES.— 
(1) IN GENERAL.—Section 438(b)(2)(B) of the 
Higher Education Act of 1965 (20 U.S.C. 1087– 
1(b)(2)(B)) is amended— 
(A) in clause (iv), by striking ‘‘or refunded 
after September 30, 2004, and before January 
1, 2006,’’ and inserting ‘‘or refunded on or
after the date of enactment of the Taxpayer- 
Teacher Protection Act of 2004,’’; and 
(B) by striking clause (v) and inserting the 
following: 
‘‘(v) Notwithstanding clauses (i) and 
(ii), the quarterly rate of the special allow-
ance 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 loans— 
‘‘(I) originated, transferred, or 
purchased on or after the date of en-
actment of the Taxpayer-Teacher Pro-
tection Act of 2004; 
‘‘(II) financed by an obligation 
that has matured, been retired, or 
defeased on or after the date of enact-
ment of the Taxpayer-Teacher Protec-
tion Act of 2004; 
‘‘(III) which the special allowance 
was determined under such subpara-
graphs or paragraph, as the case may 
be, on or after the date of enactment 
of the Taxpayer-Teacher Protection 
Act of 2004;
‘‘(IV) for which the maturity 
date of the obligation from which 
funds were obtained for such loans 
was extended on or after the date of 
enactment of the Taxpayer-Teacher 
Protection Act of 2004; or 
‘‘(V) sold or transferred to any 
other holder on or after the date of 
enactment of the Taxpayer-Teacher 
Protection Act of 2004.’’. 
(2) RULE OF CONSTRUCTION.—Nothing in the 
amendment made by paragraph (1) shall be con-
strued to abrogate a contractual agreement between 
the Federal Government and a student loan pro-
vider. 
(b) AVAILABLE FUNDS FROM REDUCED EXPENDI-
TURES.— 
(1) IN GENERAL.—Any funds available to the 
Secretary of Education as a result of reduced ex-
penditures under section 438 of the Higher Edu-
cation Act of 1965 (20 U.S.C. 1087–1) secured by 
the enactment of subsection (a) shall first be used 
by the Secretary for loan cancellation and loan for-
giveness for teachers under sections 428J and 460 
of the Higher Education Act of 1965 (20 U.S.C.
1078–10, 1087j), as amended by section 902 of this 
Act. 
(2) REMAINING FUNDS.— 
(A) IN
GENERAL.—Any such funds re-
maining after carrying out paragraph (1) shall 
be used by the Secretary of Education to make 
payments to each nonprofit lender in an 
amount that bears the same relation to the re-
maining funds as the amount the nonprofit 
lender receives for fiscal year 2005 under sec-
tion 438(b)(2)(B) of the Higher Education Act 
of 1965 (20 U.S.C. 1087–1(b)(2)(B)) bears to 
the total amount received by nonprofit lenders 
for fiscal year 2005 under such section. 
(B) DEFINITION
OF
NONPROFIT
LEND-
ER.—In this paragraph the term ‘‘nonprofit 
lender’’ means an eligible lender (as defined in 
section 435(d) of the Higher Education Act of 
1965 (20 U.S.C.1085(d)) that— 
(i) is an organization described in sec-
tion 501(c)(3) of the Internal Revenue 
Code of 1986; 
(ii) is a nonprofit entity as defined by 
applicable State law; and 
(iii) meets the following requirements:
(I) The nonprofit lender does not 
confer a salary or benefits to any em-
ployee of the nonprofit lender in an 
amount that is in excess of the salary 
and benefits provided to the Secretary 
of Education by the Department of 
Education. 
(II) The nonprofit lender does 
not maintain an ongoing relationship 
whereby the nonprofit lender passes 
on revenue directly or indirectly 
through lease, securitization, resale, 
or any other financial instrument to a 
for-profit entity or to shareholders. 
(III) The nonprofit lender does 
not offer benefits to a borrower in a 
manner directly or indirectly predi-
cated on such borrower’s participa-
tion— 
(aa) in a program under 
part B or D of title IV of the 
Higher Education Act of 1965 
(20 U.S.C. 1071 et seq., 1087a 
et seq.); or
(bb) with any particular 
lender. 
(IV) The nonprofit lender cer-
tifies that the nonprofit lender uses 
the payment received pursuant to sub-
paragraph (A) to confer grant or 
scholarship benefits to students who 
are eligible to receive Federal Pell 
Grants under subpart 1 of part A of 
title IV of the Higher Education Act 
of 1965 (20 U.S.C. 1070a et seq.). 
(V) The nonprofit lender is sub-
ject to public oversight through either 
a State charter, or through not less 
than 50 percent of the nonprofit lend-
er’s board of directors consisting of 
State appointed representatives. 
(VI) The nonprofit lender does 
not engage in the marketing of the 
relative value of programs under part 
B of title IV of the Higher Education 
Act of 1965 as compared to programs 
under part D of title IV of the Higher 
Education Act of 1965, nor does the 
nonprofit lender engage in the mar-
keting of loans or programs offered by 
for-profit lenders. This subclause shall 
not be construed to prohibit the non-
profit lender from conferring basic in-
formation on lenders under part B of 
title IV of the Higher Education Act 
of 1965 and the related benefits of-
fered by such nonprofit lenders. 
TITLE X—MAKING COLLEGE AF-
FORDABLE 
FOR 
ALL 
STU-
DENTS 
SEC. 1001. EXPANSION OF DEDUCTION FOR HIGHER EDU-
CATION EXPENSES. 
(a) AMOUNT OF DEDUCTION.—Subsection (b) of sec-
tion 222 of the Internal Revenue Code of 1986 (relating 
to deduction for qualified tuition and related expenses) is 
amended to read as follows: 
‘‘(b) LIMITATIONS.— 
‘‘(1) DOLLAR LIMITATIONS.— 
‘‘(A) IN GENERAL.—Except as provided in 
paragraph (2), the amount allowed as a deduc-
tion under subsection (a) with respect to the 
taxpayer for any taxable year shall not exceed 
the applicable dollar limit.
‘‘(B) APPLICABLE
DOLLAR
LIMIT.—The 
applicable dollar limit for any taxable year shall 
be determined as follows: 
Applicable 
‘‘Taxable year: 
dollar amount: 
2005 and 2006 ................................................................................... $6,000
2007 and 2008 ................................................................................... $8,000
2009 and 2010 ...................................................................................$10,000
2011 and thereafter ...........................................................................$12,000. 
‘‘(2) LIMITATION
BASED
ON
MODIFIED
AD-
JUSTED GROSS INCOME.— 
‘‘(A) IN
GENERAL.—The amount which 
would (but for this paragraph) be taken into ac-
count under subsection (a) shall be reduced 
(but not below zero) by the amount determined 
under subparagraph (B). 
‘‘(B) 
AMOUNT
OF
REDUCTION.—The 
amount determined under this subparagraph 
equals the amount which bears the same ratio 
to the amount which would be so taken into ac-
count as— 
‘‘(i) the excess of— 
‘‘(I) the taxpayer’s modified ad-
justed gross income for such taxable 
year, over 
‘‘(II) $65,000 ($130,000 in the 
case of a joint return), bears to
‘‘(ii) $15,000 ($30,000 in the case of 
a joint return). 
‘‘(C) MODIFIED
ADJUSTED
GROSS
IN-
COME.—For purposes of this paragraph, the 
term ‘modified adjusted gross income’ means 
the adjusted gross income of the taxpayer for 
the taxable year determined— 
‘‘(i) without regard to this section and 
sections 199, 911, 931, and 933, and 
‘‘(ii) after the application of sections 
86, 135, 137, 219, 221, and 469. 
For purposes of the sections referred to in 
clause (ii), adjusted gross income shall be deter-
mined without regard to the deduction allowed 
under this section. 
‘‘(D) INFLATION ADJUSTMENTS.— 
‘‘(i) IN GENERAL.—In the case of any 
taxable year beginning in a calendar year 
after 2005, both of the dollar amounts in 
subparagraph (B)(i)(II) shall be increased 
by an amount equal to— 
‘‘(I) such dollar amount, multi-
plied by 
‘‘(II) the cost-of-living adjust-
ment determined under section 1(f)(3)
for the calendar year in which the tax-
able year begins, by substituting ‘cal-
endar year 2004’ for ‘calendar year 
1992’ in subparagraph (B) thereof. 
‘‘(ii) ROUNDING.—If any amount as 
adjusted under clause (i) is not a multiple 
of $50, such amount shall be rounded to 
the nearest multiple of $50.’’. 
(b) QUALIFIED TUITION AND RELATED EXPENSES 
OF ELIGIBLE STUDENTS.— 
(1) IN GENERAL.—Section 222(a) of the Inter-
nal Revenue Code of 1986 (relating to allowance of 
deduction) is amended by inserting ‘‘of eligible stu-
dents’’ after ‘‘expenses’’. 
(2) DEFINITION OF ELIGIBLE STUDENT.—Sec-
tion 222(d) of such Code (relating to definitions and 
special rules) is amended by redesignating para-
graphs (2) through (6) as paragraphs (3) through 
(7), respectively, and by inserting after paragraph 
(1) the following new paragraph: 
‘‘(2) ELIGIBLE STUDENT.—The term ‘eligible 
student’ has the meaning given such term by section 
36(b)(3).’’. 
(c) DEDUCTION MADE PERMANENT.—Title IX of the 
Economic Growth and Tax Relief Reconciliation Act of
2001 (relating to sunset of provisions of such Act) shall 
not apply to the amendments made by section 431 of such 
Act. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to payments made in taxable years 
beginning after December 31, 2004. 
SEC. 1002. CREDIT FOR INTEREST ON HIGHER EDUCATION 
LOANS. 
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to nonrefundable personal credits) is 
amended by inserting after section 25B the following new 
section: 
‘‘SEC. 25C. INTEREST ON HIGHER EDUCATION LOANS. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax 
imposed by this chapter for the taxable year an amount 
equal to the interest paid by the taxpayer during the tax-
able year on any qualified education loan. 
‘‘(b) MAXIMUM CREDIT.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the credit allowed by subsection (a) for 
the taxable year shall not exceed $1,500. 
‘‘(2) LIMITATION
BASED
ON
MODIFIED
AD-
JUSTED GROSS INCOME.—
‘‘(A) IN
GENERAL.—If the modified ad-
justed gross income of the taxpayer for the tax-
able year exceeds $50,000 ($100,000 in the 
case of a joint return), the amount which would 
(but for this paragraph) be allowable as a credit 
under this section shall be reduced (but not 
below zero) by the amount which bears the 
same ratio to the amount which would be so al-
lowable as such excess bears to $20,000 
($40,000 in the case of a joint return). 
‘‘(B) MODIFIED
ADJUSTED
GROSS
IN-
COME.—The term ‘modified adjusted gross in-
come’ means adjusted gross income determined 
without regard to sections 199, 222, 911, 931, 
and 933. 
‘‘(C) INFLATION
ADJUSTMENT.—In the 
case of any taxable year beginning after 2005, 
the $50,000 and $100,000 amounts referred to 
in subparagraph (A) shall be increased by an 
amount equal to— 
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins, by substituting ‘2004’ for ‘1992’.
‘‘(D) ROUNDING.—If any amount as ad-
justed under subparagraph (C) is not a multiple 
of $50, such amount shall be rounded to the 
nearest multiple of $50. 
‘‘(c) DEPENDENTS NOT 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 re-
spect 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.—A credit 
shall be allowed under this section only with respect to 
interest paid on any qualified education loan during the 
first 60 months (whether or not consecutive) in which in-
terest payments are required. For purposes of this para-
graph, any loan and all refinancings of such loan shall be 
treated as 1 loan. 
‘‘(e) DEFINITIONS.—For purposes of this section— 
‘‘(1) QUALIFIED EDUCATION LOAN.—The term 
‘qualified education loan’ has the meaning given 
such term by section 221(d)(1). 
‘‘(2) DEPENDENT.—The term ‘dependent’ has 
the meaning given such term by section 152. 
‘‘(f) SPECIAL RULES.—
‘‘(1) DENIAL OF DOUBLE BENEFIT.—No credit 
shall be allowed under this section for any amount 
taken into account for any deduction under any 
other provision of this chapter. 
‘‘(2) MARRIED COUPLES MUST FILE JOINT RE-
TURN.—If the taxpayer is married at the close of 
the taxable year, the credit shall be allowed under 
subsection (a) only if the taxpayer and the tax-
payer’s spouse file a joint return for the taxable 
year. 
‘‘(3) MARITAL STATUS.—Marital status shall be 
determined in accordance with section 7703.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subpart A of part IV of subchapter A of chapter 
1 of the Internal Revenue Code of 1986 is amended by 
inserting after the item relating to section 25B the fol-
lowing new item: 
‘‘Sec. 25C. Interest on higher education loans.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to any qualified education loan (as 
defined in section 25C(e)(1) of the Internal Revenue Code 
of 1986, as added by this section) incurred on, before, or 
after the date of the enactment of this Act, but only with 
respect to any loan interest payment due after December 
31, 2004.
SEC. 1003. HOPE AND LIFETIME LEARNING CREDITS TO BE 
REFUNDABLE. 
(a) CREDIT TO BE REFUNDABLE.—Section 25A of 
the Internal Revenue Code of 1986 (relating to Hope and 
Lifetime Learning credits) is hereby moved to subpart C 
of part IV of subchapter A of chapter 1 of such Code (re-
lating to refundable credits) and inserted after section 35. 
(b) TECHNICAL AMENDMENTS.— 
(1) Section 36 of such Code is redesignated as 
section 37. 
(2) Section 25A of such Code (as moved by 
subsection (a)) is redesignated as section 36. 
(3) Paragraph (1) of section 36(a) of such Code 
(as redesignated by paragraph (2)) is amended by 
striking ‘‘this chapter’’ and inserting ‘‘this subtitle’’. 
(4) Subparagraph (B) of section 72(t)(7) of 
such 
Code 
is 
amended 
by 
striking 
‘‘section 
25A(g)(2)’’ and inserting ‘‘section 36(g)(2)’’. 
(5) Subparagraph (A) of section 135(d)(2) of 
such Code is amended by striking ‘‘section 25A’’ and 
inserting ‘‘section 36’’. 
(6) Section 221(d) of such Code is amended— 
(A) by striking ‘‘section 25A(g)(2)’’ in 
paragraph 
(2)(B) 
and 
inserting 
‘‘section 
36(g)(2)’’,
(B) by striking ‘‘section 25A(f)(2)’’ in the 
matter following paragraph (2)(B) and insert-
ing ‘‘section 36(f)(2)’’, and 
(C) by striking ‘‘section 25A(b)(3)’’ in 
paragraph (3) and inserting ‘‘section 36(b)(3)’’. 
(7) Section 222 of such Code is amended— 
(A) by striking ‘‘section 25A’’ in subpara-
graph (A) of subsection (c)(2) and inserting 
‘‘section 36’’, 
(B) by striking ‘‘section 25A(f)’’ in sub-
section (d)(1) and inserting ‘‘section 36(f)’’, 
and 
(C) by striking ‘‘section 25A(g)(2)’’ in sub-
section (d)(1) and inserting ‘‘section 36(g)(2)’’. 
(8) Section 529 of such Code is amended— 
(A) by striking ‘‘section 25A(g)(2)’’ in sub-
clause (I) of subsection (c)(3)(B)(v) and insert-
ing ‘‘section 36(g)(2)’’, 
(B) by striking ‘‘section 25A’’ in subclause 
(II) of subsection (c)(3)(B)(v) and inserting 
‘‘section 36’’, and 
(C) by striking ‘‘section 25A(b)(3)’’ in 
clause (i) of subsection (e)(3)(B) and inserting 
‘‘section 36(b)(3)’’. 
(9) Section 530 of such Code is amended—
(A) by striking ‘‘section 25A(g)(2)’’ in sub-
clause (I) of subsection (d)(2)(C)(i) and insert-
ing ‘‘section 36(g)(2)’’, 
(B) by striking ‘‘section 25A’’ in subclause 
(II) of subsection (d)(2)(C)(i) and inserting 
‘‘section 36’’, and 
(C) by striking ‘‘section 25A(g)(2)’’ in 
clause (iii) of subsection (d)(4)(B) and inserting 
‘‘section 36(g)(2)’’. 
(10) Subsection (e) of section 6050S of such 
Code is amended by striking ‘‘section 25A’’ and in-
serting ‘‘section 36’’. 
(11) Subparagraph (J) of section 6213(g)(2) of 
such 
Code 
is 
amended 
by 
striking 
‘‘section 
25A(g)(1)’’ and inserting ‘‘section 36(g)(1)’’. 
(12) Paragraph (2) of section 1324(b) of title 
31, United States Code, is amended by inserting be-
fore the period ‘‘or from section 36 of such Code’’. 
(13) The table of sections for subpart C of part 
IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by striking the item 
relating to section 36 and inserting the following: 
‘‘Sec. 36. Hope and Lifetime Learning credits. 
‘‘Sec. 37. Overpayments of tax.’’.
(14) The table of sections for subpart A of such 
part IV is amended by striking the item relating to 
section 25A. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2004. 
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