SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Taxpayer-Teacher Pro-
tection Act of 2004’’.
SEC. 2. REDUCTION OF SPECIAL ALLOWANCE PAYMENTS
FOR LOANS FROM THE PROCEEDS OF TAX EX-
EMPT ISSUES.
Section 438(b)(2)(B) (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 sub-
paragraph’’;
(3) in clause (iv), by inserting ‘‘or refunded
after September 30, 2004, and before January 1,
2006,’’ 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 ex-
cluded from gross income under the Inter-
nal Revenue Code of 1986 and which obli-
gations were originally issued before Octo-
ber 1, 1993; or
‘‘(bb) obtained from collections or de-
fault reimbursements on, or interest or
other income pertaining to, eligible loans
made or purchased with funds described in
division (aa), or from income on the invest-
ment of such funds; and
‘‘(II) are—
‘‘(aa) financed by such an obligation
that, after September 30, 2004, and before
January 1, 2006, has matured or been re-
tired or defeased;
‘‘(bb) refinanced after September 30,
2004, and before January 1, 2006, 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 after September 30, 2004, and be-
fore January 1, 2006.’’.
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 such Act (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 high-
ly 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 pur-
poses 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 RE-
PAID.—
(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 fol-
lowing:
‘‘(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 responsi-
bility is to provide special education to
children with disabilities (as those terms