SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Tuition Assistance for Families 
Act''.

SEC. 2. EXPANSION OF TUITION TAX DEDUCTION.

    (a) In General.--Subparagraphs (A) and (B) of section 222(b)(2) of 
the Internal Revenue Code of 1986 (relating to dollar limitation) are 
amended to read as follows:
                    ``(A) In general.--The applicable dollar limit 
                shall be equal to--
                            ``(i) in the case of a taxpayer whose 
                        adjusted gross income for the taxable year does 
                        not exceed $65,000 ($130,000 in the case of a 
                        joint return), $12,000,
                            ``(ii) with respect to any taxable year 
                        beginning in 2004 or 2005, in the case of a 
                        taxpayer not described in clause (i) whose 
                        adjusted gross income for the taxable year does 
                        not exceed $80,000 ($160,000 in the case of a 
                        joint return), $2,000, and
                            ``(iii) in the case of any other taxpayer, 
                        zero.
                    ``(B) Inflation adjustment.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning after 2003, each dollar 
                        amount referred to in subparagraph (A)(i) shall 
                        be increased by an amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                (1)(f)(3) for the calendar year in 
                                which the taxable year begins, by 
                                substituting `2002' for `1992'.
                            ``(ii) Rounding.--If any amount as adjusted 
                        under clause (i) is not a multiple of $100, 
                        such amount shall be rounded to the next lowest 
                        multiple of $100.''.
    (b) Permanent Deduction.--Section 222 of the Internal Revenue Code 
of 1986 (relating to qualified tuition and related expenses) is amended 
by striking subsection (e).
    (c) Effective Date.--The amendments made by this section shall 
apply to payments made in taxable years beginning after December 31, 
2002.

SEC. 3. EXPANSION OF LIFETIME LEARNING CREDIT.

    (a) In General.--Section 25A(c)(1) of the Internal Revenue Code of 
1986 (relating to per taxpayer credit) is amended--
            (1) by striking ``20 percent'' and inserting ``25 
        percent'', and
            (2) by striking ``$10,000 ($5,000 in the case of taxable 
        years beginning before January 1, 2003)'' and inserting 
        ``$12,000''.
    (b) Inflation Adjustment.--Section 25A(h) of the Internal Revenue 
Code of 1986 (relating to inflation adjustments) is amended by adding 
at the end the following new paragraph:
            ``(3) Dollar limitation on amount of lifetime learning 
        credit.--
                    ``(A) In general.--In the case of any taxable year 
                beginning after 2003, the dollar amount referred to in 
                subsection (c)(1) shall be increased by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section (1)(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        by substituting `2002' for `1992'.
                    ``(B) Rounding.--If any amount as adjusted under 
                subparagraph (A) is not a multiple of $100, such amount 
                shall be rounded to the next lowest multiple of 
                $100.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments made in taxable years beginning after December 31, 
2002.

SEC. 4. INCREASE IN INCOME LIMITS FOR HOPE AND LIFETIME LEARNING 
              CREDITS.

    (a) In General.--Section 25A(d)(2)(A)(ii) of the Internal Revenue 
Code of 1986 (relating to limitation based on modified adjusted gross 
income) is amended by striking ``$40,000 ($80,000'' and inserting 
``$55,000 ($110,000''.
    (b) Conforming Amendments.--Section 25A(h)(2)(A) of the Internal 
Revenue Code of 1986 is amended--
            (1) by striking ``2001'' in the matter preceding clause (i) 
        and inserting ``2003'',
            (2) by striking ``the $40,000 and $80,000 amounts'' in such 
        matter and inserting ``the $55,000 and $110,000 amounts'', and
            (3) by striking ``2000'' in clause (ii) and inserting 
        ``2002''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments made in taxable years beginning after December 31, 
2002.

SEC. 5. MAXIMUM PELL GRANT AWARDS.

    The Department of Education Appropriations Act, 2002 (Public Law 
107-116) is amended under the heading ``Student Financial Assistance'' 
by striking ``$4,000'' and inserting ``$4,500''.

SEC. 6. ACADEMIC ACHIEVEMENT SCHOLARSHIPS.

    (a) Scholarships.--The Secretary of Education is authorized to 
award a scholarship for academic year 2003-2004 and succeeding academic 
years to each student in a State who graduated in the top 5 percent of 
such student's graduating class from secondary school in academic year 
2002-2003 or a succeeding academic year to enable such student to pay 
the cost of attendance at an institution of higher education.
    (b) Amount.--Each scholarship awarded under this section shall be 
in the amount of $1,000.
    (c) Use.--Each student awarded a scholarship under this section 
shall use the funds to pay the cost of attendance at an institution of 
higher education.
    (d) Construction of Needs Provision.--
            (1) In general.--Except as provided in paragraph (2), 
        nothing in this section, or any other Act, shall be construed 
        to permit the receipt of a scholarship under this section to be 
        counted for any needs test in connection with the awarding of 
        any grant or the making of any loan under the Higher Education 
        Act of 1965 (20 U.S.C. 1001 et seq.) or any other provision of 
        Federal law relating to educational assistance.
            (2) Exception.--In determining the need of a student for 
        Federal financial assistance, an institution of higher 
        education may take into consideration the amount of scholarship 
        assistance received under this section if the total amount of 
        scholarship assistance received under this section plus the 
        amount of other financial assistance available to a student 
        exceeds the student's cost of attendance at the institution.
    (e) Regulations.--The Secretary of Education shall promulgate 
regulations regarding how scholarships awarded under this section will 
be allocated to both public and private school students.
    (f) Definitions.--In this section:
            (1) Cost of attendance.--The term `cost of attendance' has 
        the meaning given the term in section 472 of the Higher 
        Education Act of 1965 (20 U.S.C. 1087ll).
            (2) Institution of higher education.--The term `institution 
        of higher education' has the meaning given the term in section 
        101 of the Higher Education Act of 1965 (20 U.S.C. 1001).
Output: Tuition Assistance for Families Act - Amends the Internal Revenue Code to expand the tax deduction for qualified higher education tuition and related expenses. Sets such deduction at: (1) $12,000 for those with incomes up to $65,000 single or $130,000 joint; and (2) $2,000 for those whose incomes are above that level, but not more than $80,000 single or $160,000 joint. Provides inflation adjustment. Makes such tuition deduction permanent.Increases the amount of the Lifetime Learning tax credit percentage from 20 to 25 percent. Increases the amount of education expenses subject to such credit from $10,000 to $12,000 (thus making the maximum allowable credit $3,000, rather than the current $2,000). Provides inflation adjustment.Raises annual income limits for the Hope and Lifetime Learning tax credits to $55,000 single and $110,000 joint.Amends the Department of Education Appropriations Act, 2002 (Public Law 107-116) to increase the maximum Pell Grant award from $4,000 to $4,500.Establishes an academic achievement scholarship program. Authorizes the Secretary of Education to award a $1,000 college scholarship to each student in a State who graduates in the top five percent of his or her secondary school's graduating class.