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.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. INTEREST DETERMINATIONS ON STUDENT 
LOANS. 
(a) IN GENERAL.—Section 221 of the Internal Rev-
enue Code of 1986 (relating to interest on education 
loans) is amended by redesignating subsection (f) as sub-
section (g) and by inserting after subsection (e) the fol-
lowing new subsection:
‘‘(f) DETERMINATION OF INTEREST PAID.—In the 
case of a qualified education loan initially disbursed after 
December 31, 2004, for purposes of this section and not-
withstanding any other provision of this title—
‘‘(1) IN GENERAL.—
‘‘(A) TREATMENT AS INTEREST.—A loan 
payment on such loan shall be treated as a pay-
ment of interest to the extent of the balance, 
immediately before such payment, in the accu-
mulated interest account with respect to such 
loan. 
‘‘(B) 
EXCEPTION.—Subparagraph 
(A) 
shall not apply to any payment of collection 
costs, late fees, and penalties. 
‘‘(2) ACCUMULATED INTEREST ACCOUNT.—
‘‘(A) IN
GENERAL.—The term ‘accumu-
lated interest account’ means an account which 
is adjusted in accordance with this paragraph. 
‘‘(B) INCREASES.—The balance in the ac-
cumulated interest account shall be increased 
for any period by the sum of—
‘‘(i) the loan origination fees incurred 
by the borrower in such period, and 
‘‘(ii) the amount of stated interest on 
the loan for such period.
‘‘(C) DECREASES.—The balance in the ac-
cumulated interest account shall be decreased 
(but not below zero) by payments made on the 
loan to the extent treated as interest under this 
section. 
‘‘(3) LOAN ORIGINATION FEES.—
‘‘(A) FEDERAL
PROGRAMS.—The term 
‘loan origination fee’ includes any fee imposed 
under any of the following provisions of the 
Higher Education Act of 1965: 
‘‘(i) Section 438(c) (20 U.S.C. 1087–
1(c)). 
‘‘(ii) Section 428(b)(1)(H) (20 U.S.C. 
1078(b)(1)(H)). 
‘‘(iii) Section 455(c) (20 U.S.C. 
1087e(c)). 
‘‘(B) FEES FOR SERVICES OR PROPERTY 
EXCLUDED.—Except as provided under sub-
paragraph (A), the term ‘loan origination fee’ 
does not include any fee which is a fee for serv-
ices or property. 
‘‘(4) ANTI-ABUSE RULE.—The Secretary may 
prescribe rules to prevent the acceleration of addi-
tions to the accumulated interest account where the
loan origination fees or stated interest do not prop-
erly reflect the substance of the loan.’’. 
(b) INFORMATION RETURNS.—
(1) INTEREST AND LOAN ORIGINATION FEE DE-
FINED.—Subsection (e) of section 6050S of such 
Code (relating to general rule for form and manner 
of returns) is amended by inserting before the period 
at the end the following: ‘‘, and the term ‘interest’ 
has the same meaning as when used in section 221’’. 
(2) PRE-2005 LOANS.—The regulations under 
section 6050S of the Internal Revenue Code of 1986 
which are applicable to loans made before September 
1, 2004, shall also apply to loans made on or after 
such date which are initially disbursed before Janu-
ary 1, 2005. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2004.
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