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 ap-
proved program of education pursued on a full-time 
basis. 
‘‘(2) At the monthly rate of $700 for an ap-
proved program of education pursued on a three-
quarter-time basis. 
‘‘(3) At the monthly rate of $500 for an ap-
proved program of education pursued on a half-time 
basis. 
‘‘(4) At the monthly rate of $300 for an ap-
proved 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 Sec-
retary 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, ex-
ceeds
‘‘(2) such Consumer Price Index for the 12–
month period preceding the 12-month period de-
scribed in paragraph (1).’’. 
(b) CONFORMING AMENDMENTS.—(1) Section 3002 
of such title is amended by inserting at the end the fol-
lowing new paragraph: 
‘‘(9) The term ‘enhanced educational assistance’ 
means educational assistance provided under subchapter 
V.’’. 
(2) Section 3011 of such title is amended in sub-
section (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 in-
serting ‘‘educational assistance under this subchapter’’. 
(4) Section 3018B of such title is amended by strik-
ing ‘‘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 strik-
ing ‘‘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 ‘‘sub-
chapter’’. 
(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 ap-
pears; 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 AS-
SISTANCE UNDER MONTGOMERY GI BILL. 
(a) RATES FOR BASIC EDUCATIONAL ASSISTANCE.—
Section 3015 of title 38, United States Code, is amend-
ed—
(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 near-
est 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 institu-
tions 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 pre-
ceding 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 allow-
ances payable under this section for the fiscal year begin-
ning in that year. 
‘‘(4) Not later than September 30 each year, the Sec-
retary 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 PARTICI-
PATION 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 para-
graphs (1) and (2), respectively. 
(2) Section 3012 of such title is amended—
(A) by striking subsection (c); and
(B) by redesignating paragraph (3) as para-
graph (2). 
(2) Section 3012(a) of such title is amended—
(A) by striking paragraph (2); and 
(B) by redesignating paragraph (3) as para-
graph (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 para-
graph (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 edu-
cational assistance under chapter 30 of title 38, United 
States Code, on or after such date. 
(c) EXCLUSION FROM INCOME FOR ELIGIBILITY DE-
TERMINATIONS 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 fol-
lowing 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 consid-
ered as income for purposes of determining eligibility of 
such individual for education grants or loans under any 
other provision of Federal law.’’.
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