[Congressional Record Volume 141, Number 151 (Tuesday, September 26, 1995)]
[Senate]
[Pages S14312-S14314]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself and Ms. Moseley-Braun):
  S. 1273. A bill to amend the Internal Revenue Code of 1986 to allow a 
credit for interest paid on education loans; to the Committee on 
Finance.


              the higher education investment act of 1995

  Mr. GRASSLEY. Mr. President, today I am introducing 
legislation on behalf of myself and my able colleague from Illinois, 
Senator Moseley-Braun. We call it the Higher Education Investment Act 
of 1995. We hope that this bill will launch an individual income tax 
credit for interest paid by young people on their student loans.
  Our own young people are the ones who truly must balance the Federal 
budget for the long run. I believe that if we on Capitol Hill want to 
do our part to balance the Federal budget for the long run, then we 
must aid human investment in one of its highest forms: knowledge gained 
through education. As the U.S. Senate, with an obligation toward the 
national economy, we must underwrite higher education as an economic 
investment toward future Federal tax revenues. This bill is the 
workable legislative vehicle.
  As a practical matter of income tax credits, the Higher Education 
Investment Act of 1995 provides targeted taxpayers with a credit for up 
to 20 percent of the interest paid during the first 5 years in which 
payments are required on qualified educational loans. A student 
taxpayer may utilize both this credit and the standard deduction. Thus, 
a young person, or young married couple, can utilize this credit 
regardless of whether they are fortunate enough to have the money to 
begin buying a home and enjoying its related tax benefits. In fact, we 
intend this bill to aid young people, who are just starting out in 
life, in their effort to retain enough cash so that they too can have a 
chance at beginning the good life that many of us from older 
generations have enjoyed.
  As a Congress, we have been decades in saddling the next generation 
with the burden of paying off our national debt. At a minimum, we 
should allow its members a mechanism to leverage themselves to 
accomplish their enormous task. To earn the necessary cash flow to 
succeed, and to not slip into a lower standard of living that we 
currently enjoy, the members of the next generation must arm themselves 
both with knowledge and income potential. During the past decade, 
tuition and fees at both public and private colleges and universities 
have increased at rates far exceeding inflation. During the same decade 
we in Congress eliminated the interest deduction for student loans. 
Thus, we require the next generation to not only borrow more than we 
borrowed, we force them pay more than we paid. All of us must find it 
ironic that, in their efforts to settle up on our open account, which 
is full of our excesses, we have denied them the same tax benefitted 
education that we enjoyed.
  The social cost is enormous. Large volumes of student loan debt steer 
students away from socially useful though low paying careers such as 
teaching, research, or public service. It curbs entrepreneurial action 
because entrepreneurial ventures involve risk, and large, fixed, 
monthly student loan repayment obligations do not lend themselves to a 
young person's appetite for 

[[Page S 14313]]
risk. Without this student loan interest credit, which is consistent 
with a progressive tax code, we will fail to invest in our most long 
lived and productive assets: the minds of our electorate.
  Therefore, Mr. President, we challenge our colleagues to once again 
underwrite knowledge by first underwriting and co-sponsoring this bill.
  Mr. President, I ask unanimous consent to include the bill in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1273

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Higher Education Investment 
     Act of 1995''.

     SEC. 2. CREDIT FOR INTEREST ON EDUCATION LOANS.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     nonrefundable personal credits) is amended by inserting after 
     section 22 the following new section:

     ``SEC. 23. INTEREST ON EDUCATION LOANS.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to 20 
     percent of the interest paid by the taxpayer during the 
     taxable year on any qualified education loan.
       ``(b) Maximum Credit.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     credit allowed by subsection (a) for the taxable year shall 
     not exceed $500 ($1,000 in the case of 2 or more individuals 
     with qualified higher education expenses paid by any 
     qualified education loan).
       ``(2) Limitation based on modified adjusted gross income.--
       ``(A) In general.--If the modified adjusted gross income of 
     the taxpayer for the taxable year exceeds $40,000 ($60,000 in 
     the case of a joint return), the amount which would (but for 
     this paragraph) be allowable as a credit under this section 
     shall be reduced (but not below zero) by the amount which 
     bears the same ratio to the amount which would be so 
     allowable as such excess bears to $15,000.
       ``(B) Modified adjusted gross income.--The term `modified 
     adjusted gross income' means adjusted gross income 
     determined--
       ``(i) without regard to sections 135, 911, 931, and 933, 
     and
       ``(ii) after application of sections 86, 219, and 469.
       ``(C) Inflation adjustment.--In the case of any taxable 
     year beginning after 1996, the $40,000 and $60,000 amounts 
     referred to in subparagraph (A) 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, except that subparagraph (B) of subsection 
     (1)(f)(3) shall be applied by substituting `1995' for `1992'.
       ``(D) Rounding.--If any amount as adjusted under 
     subparagraph (C) is not a multiple of $50, such amount shall 
     be rounded to the nearest multiple of $50 (or, if such amount 
     is a multiple of $25, such amount shall be rounded to the 
     next highest multiple of $50).
       ``(c) Limitation on Taxpayers Eligible for Credit.--No 
     credit shall be allowed by this section to an individual for 
     the taxable year if a deduction under section 151 with 
     respect to such individual is allowed to another taxpayer for 
     the taxable year beginning in the calendar year in which such 
     individual's taxable year begins.
       ``(d) Limit on Period Credit Allowed.--
       ``(1) Taxpayer and taxpayer's spouse.--Except as provided 
     in paragraph (2), a credit shall be allowed under this 
     section only with respect to interest paid on any qualified 
     education loan during the first 60 months (whether or not 
     consecutive) in which interest payments are required. For 
     purposes of this paragraph, any loan and all refinancings of 
     such loan shall be treated as 1 loan.
       ``(2) Dependent.--If the qualified education loan was used 
     to pay education expenses of an individual other than the 
     taxpayer or the taxpayer's spouse, a credit shall be allowed 
     under this section for any taxable year with respect to such 
     loan only if--
       ``(A) a deduction under section 151 with respect to such 
     individual is allowed to the taxpayer for such taxable year, 
     and
       ``(B) such individual is at least a half-time student with 
     respect to such taxable year.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Qualified education loan.--The term `qualified 
     education loan' means any indebtedness incurred to pay 
     qualified higher education expenses--
       ``(A) which are incurred on behalf of the taxpayer, the 
     taxpayer's spouse, or a dependent of the taxpayer,
       ``(B) which are paid or incurred within a reasonable period 
     of time before or after the indebtedness is incurred, and
       ``(C) which are attributable to education furnished during 
     a period during which the recipient was at least a half-time 
     student.

     Such term includes indebtedness used to refinance 
     indebtedness which qualifies as a qualified education loan. 
     The term `qualified education loan' shall not include any 
     indebtedness owed to a person who is related (within the 
     meaning of section 267(b) or 707(b)(1)) to the taxpayer.
       ``(2) Qualified higher education expenses.--The term 
     `qualified higher education expenses' means the cost of 
     attendance (as defined in section 472 of the Higher Education 
     Act of 1965, 20 U.S.C. 1087ll, as in effect on the day before 
     the date of the enactment of this Act) of the taxpayer, the 
     taxpayer's spouse, or a dependent of the taxpayer at an 
     eligible educational institution. For purposes of the 
     preceding sentence, the term `eligible educational 
     institution' has the same meaning given such term by section 
     135(c)(3), except that such term shall also include an 
     institution conducting an internship or residency program 
     leading to a degree or certificate awarded by an institution 
     of higher education, a hospital, or a health care facility 
     which offers postgraduate training.
       ``(3) Half-time student.--The term `half-time student' 
     means any individual who would be a student as defined in 
     section 151(c)(4) if `half-time' were substituted for `full-
     time' each place it appears in such section.
       ``(4) Dependent.--The term `dependent' has the meaning 
     given such term by section 152.
       ``(f) Special Rules.--
       ``(1) Denial of double benefit.--No credit shall be allowed 
     under this section for any amount for which a deduction is 
     allowable under any other provision of this chapter.
       ``(2) Married couples must file joint return.--If the 
     taxpayer is married at the close of the taxable year, the 
     credit shall be allowed under subsection (a) only if the 
     taxpayer and the taxpayer's spouse file a joint return for 
     the taxable year.
       ``(3) Marital status.--Marital status shall be determined 
     in accordance with section 7703.''
       (b) Reporting Requirement.--
       (1) In general.--Subpart B of part III of subchapter A of 
     chapter 61 of the Internal Revenue Code of 1986 (relating to 
     information concerning transactions with other persons) is 
     amended by inserting after section 6050P the following new 
     section:

     ``SEC. 6050Q. RETURNS RELATING TO EDUCATION LOAN INTEREST 
                   RECEIVED IN TRADE OR BUSINESS FROM INDIVIDUALS.

       ``(a) Education Loan Interest of $600 or More.--Any 
     person--
       ``(1) who is engaged in a trade or business, and
       ``(2) who, in the course of such trade or business, 
     receives from any individual interest aggregating $600 or 
     more for any calendar year on any qualified education loan,

     shall make the return described in subsection (b) with 
     respect to each individual from whom such interest was 
     received at such time as the Secretary may by regulations 
     prescribe.
       ``(b) Form and Manner of Returns.--A return is described in 
     this subsection if such return--
       ``(1) is in such form as the Secretary may prescribe,
       ``(2) contains--
       ``(A) the name and address of the individual from whom the 
     interest described in subsection (a)(2) was received,
       ``(B) the amount of such interest received for the calendar 
     year, and
       ``(C) such other information as the Secretary may 
     prescribe.
       ``(c) Application to Governmental Units.--For purposes of 
     subsection (a):
       ``(1) Treated as persons.--The term `person' includes any 
     governmental unit (and any agency or instrumentality 
     thereof).
       ``(2) Special rules.--In the case of a governmental unit or 
     any agency or instrumentality thereof--
       ``(A) subsection (a) shall be applied without regard to the 
     trade or business requirement contained therein, and
       ``(B) any return required under subsection (a) shall be 
     made by the officer or employee appropriately designated for 
     the purpose of making such return.
       ``(d) Statements To Be Furnished to Individuals With 
     Respect to Whom Information is Required.--Every person 
     required to make a return under subsection (a) shall furnish 
     to each individual whose name is required to be set forth in 
     such return a written statement showing--
       ``(1) the name and address of the person required to make 
     such return, and
       ``(2) the aggregate amount of interest described in 
     subsection (a)(2) received by the person required to make 
     such return from the individual to whom the statement is 
     required to be furnished.

     The written statement required under the preceding sentence 
     shall be furnished on or before January 31 of the year 
     following the calendar year for which the return under 
     subsection (a) was required to be made.
       ``(e) Qualified Education Loan Defined.--For purposes of 
     this section, except as provided in regulations prescribed by 
     the Secretary, the term `qualified education loan' has the 
     meaning given such term by section 23(e)(1).
       ``(f) Returns Which Would be Required To Be Made by 2 or 
     More Persons.--Except to the extent provided in regulations 
     prescribed by the Secretary, in the case of interest received 
     by any person on behalf of another person, only the person 
     first receiving such interest shall be required to make the 
     return under subsection (a).''
       (c) Clerical Amendments.--
       (1) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1 of the 

[[Page S 14314]]
     Internal Revenue Code of 1986 is amended by inserting after the item 
     relating to section 22 the following new item:

``Sec. 23. Interest on education loans.''

       (2) The table of sections for subpart B of part III of 
     subchapter A of chapter 61 of such Code is amended by 
     inserting after the item relating to section 6050P the 
     following new item:

``Sec. 6050Q. Returns relating to education loan interest received in 
              trade or business from individuals.''

       (d) Effective Date.--The amendments made by this section 
     shall apply to any qualified education loan (as defined in 
     section 23(e)(1) of the Internal Revenue Code of 1986, as 
     added by this section) incurred on, before, or after the date 
     of the enactment of this Act, but only with respect to any 
     loan interest payment due after December 31, 1995, and before 
     the termination of the period described in section 23(d)(1) 
     of such Code.
                                 ______