To amend the Internal Revenue Code of 1986 to make higher education more affordable by providing a full tax deduction for higher education expenses and interest on student loans.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Make College Affordable Act of 
2005''.

SEC. 2. DEDUCTION FOR HIGHER EDUCATION EXPENSES.

    (a) Deduction Allowed.--Section 221 of the Internal Revenue Code of 
1986 is amended to read as follows:

``SEC. 221. HIGHER EDUCATION EXPENSES.

    ``(a) Allowance of Deduction.--In the case of an individual, there 
shall be allowed as a deduction an amount equal to the sum of--
            ``(1) the qualified higher education expenses, plus
            ``(2) interest on qualified education loans,
paid by the taxpayer during the taxable year.
    ``(b) Qualified Higher Education Expenses.--For purposes of this 
section--
            ``(1) Qualified higher education expenses.--
                    ``(A) In general.--The term `qualified higher 
                education expenses' means--
                            ``(i) tuition and fees charged by an 
                        educational institution and required for the 
                        enrollment or attendance of--
                                    ``(I) the taxpayer,
                                    ``(II) the taxpayer's spouse,
                                    ``(III) any dependent of the 
                                taxpayer with respect to whom the 
                                taxpayer is allowed a deduction under 
                                section 151, or
                                    ``(IV) any grandchild of the 
                                taxpayer,
                        as an eligible student at an institution of 
                        higher education, and
                            ``(ii) reasonable living expenses for such 
                        an individual while away from home and 
                        attending such institution.
                    ``(B) Eligible courses.--Amounts paid for qualified 
                higher education expenses of any individual shall be 
                taken into account under subsection (a) only to the 
                extent such expenses--
                            ``(i) are attributable to courses of 
                        instruction for which credit is allowed toward 
                        a baccalaureate degree by an institution of 
                        higher education or toward a certificate of 
                        required course work at a vocational school, 
                        and
                            ``(ii) are not attributable to any graduate 
                        program of such individual.
                    ``(C) Eligible student.--For purposes of 
                subparagraph (A), the term `eligible student' means a 
                student who--
                            ``(i) meets the requirements of section 
                        484(a)(1) of the Higher Education Act of 1965 
                        (20 U.S.C. 1091(a)(1)), as in effect on the 
                        date of the enactment of this section, and
                            ``(ii) is carrying at least one-half the 
                        normal full-time work load for the course of 
                        study the student is pursuing, as determined by 
                        the institution of higher education.
            ``(2) Institution of higher education.--The term 
        `institution of higher education' is as defined in section 101 
        of the Higher Education Act of 1965 (20 U.S.C. 1001).
    ``(c) Qualified Education Loan.--For purposes of this section--
            ``(1) In general.--The term `qualified education loan' 
        means a loan which is--
                    ``(A) made, insured, or guaranteed by the Federal 
                Government,
                    ``(B) made by a State or a political subdivision of 
                a State,
                    ``(C) made from the proceeds of a qualified student 
                loan bond under section 144(b), or
                    ``(D) made by an institution of higher education.
            ``(2) Limitation.--The amount of interest on a qualified 
        education loan which is taken into account under subsection 
        (a)(2) shall not exceed the amount which bears the same ratio 
        to such amount of interest as--
                    ``(A) the proceeds from such loan used for 
                qualified higher education expenses, bears to
                    ``(B) the total proceeds from such loan.
        For purposes of the preceding sentence, the term `qualified 
        higher education expenses' shall be determined without regard 
        to subsection (c)(1)(A)(i)(IV).
    ``(d) Special Rules.--
            ``(1) No double benefit.--
                    ``(A) In general.--No deduction shall be allowed 
                under subsection (a) for any expense for which a 
                deduction is allowable to the taxpayer under any other 
                provision of this chapter unless the taxpayer 
                irrevocably waives his right to the deduction of such 
                expense under such other provision.
                    ``(B) Denial of deduction if credit elected.--No 
                deduction shall be allowed under subsection (a) for a 
                taxable year with respect to the qualified higher 
                education expenses of an individual if the taxpayer 
                elects to have section 25A apply with respect to such 
                individual for such year.
                    ``(C) Dependents.--No deduction shall be allowed 
                under subsection (a) to any individual with respect to 
                whom a deduction under section 151 is allowable to 
                another taxpayer for a taxable year beginning in the 
                calendar year in which such individual's taxable year 
                begins.
                    ``(D) Coordination with exclusions.--A deduction 
                shall be allowed under subsection (a) for qualified 
                higher education expenses only to the extent the amount 
                of such expenses exceeds the amount excludable under 
                section 135 or 530(d)(2) for the taxable year.
            ``(2) Limitation on taxable year of deduction.--
                    ``(A) In general.--A deduction shall be allowed 
                under subsection (a) for qualified higher education 
                expenses for any taxable year only to the extent such 
                expenses are in connection with enrollment at an 
                institution of higher education during the taxable 
                year.
                    ``(B) Certain prepayments allowed.--Subparagraph 
                (A) shall not apply to qualified higher education 
                expenses paid during a taxable year if such expenses 
                are in connection with an academic term beginning 
                during such taxable year or during the first 3 months 
                of the next taxable year.
            ``(3) Adjustment for certain scholarships and veterans 
        benefits.--The amount of qualified higher education expenses 
        otherwise taken into account under subsection (a) or (d)(2) 
        with respect to the education of an individual shall be reduced 
        (before the application of subsection (b)) by the sum of the 
        amounts received with respect to such individual for the 
        taxable year as--
                    ``(A) a qualified scholarship which under section 
                117 is not includable in gross income,
                    ``(B) an educational assistance allowance under 
                chapter 30, 31, 32, 34, or 35 of title 38, United 
                States Code, or
                    ``(C) a payment (other than a gift, bequest, 
                devise, or inheritance within the meaning of section 
                102(a)) for educational expenses, or attributable to 
                enrollment at an eligible educational institution, 
                which is exempt from income taxation by any law of the 
                United States.
            ``(4) No deduction for married individuals filing separate 
        returns.--If the taxpayer is a married individual (within the 
        meaning of section 7703), this section shall apply only if the 
        taxpayer and the taxpayer's spouse file a joint return for the 
        taxable year.
            ``(5) Nonresident aliens.--If the taxpayer is a nonresident 
        alien individual for any portion of the taxable year, this 
        section shall apply only if such individual is treated as a 
        resident alien of the United States for purposes of this 
        chapter by reason of an election under subsection (g) or (h) of 
        section 6013.
            ``(6) Regulations.--The Secretary may prescribe such 
        regulations as may be necessary or appropriate to carry out 
        this section, including regulations requiring recordkeeping and 
        information reporting.''.
    (b) Deduction Allowed in Computing Adjusted Gross Income.--
Paragraph (17) of section 62(a) of such Code is amended to read as 
follows:
            ``(17) Higher education expenses.--The deduction allowed by 
        section 221.''.
    (c) Conforming Amendments.--
            (1) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by striking the item relating 
        to section 221 and inserting the following new item:

``Sec. 221. Higher education expenses.''.
            (2) Section 6050S(e) of such Code is amended by striking 
        ``section 221(d)(1)'' and inserting ``section 221(c)(1)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to payments made after December 31, 2004.

Summary: Make College Affordable Act of 2005 - Amends the Internal Revenue Code to allow taxpayers, their spouses, dependents, and grandchildren a tax deduction from gross income for certain higher education expenses and for interest on certain student loans. Includes as higher education expenses undergraduate tuition and fees and reasonable living expenses while attending an institution of higher education.