[Congressional Record Volume 147, Number 66 (Tuesday, May 15, 2001)]
[Senate]
[Pages S4949-S4951]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LIEBERMAN:
  S. 888. A bill to amend the Internal Revenue Code of 1986 to provide 
assistance to students and families coping with the costs of higher 
education, and for other purposes; to the Committee on Finance.
  Mr. LIEBERMAN. Mr. President, today I am pleased to introduce the 
College Tuition Assistance Act of 2001, a bill that will provide tax 
relief to middle and lower income American families struggling to pay 
the rising cost of college tuition for their children.
  Last year, at my request, the Committee on Governmental Affairs held 
two days of hearings on the affordability of higher education. Those 
hearings showed that the price of college tuition continues to rise at 
a pace that exceeds the rate of inflation. In fact, the most recent 
data released by the College Board show that since 1980, both public 
and private four-year college tuitions have increased on average more 
than 115 percent over inflation. It's no wonder families are worried 
about their ability to afford a college education for their children, 
and about the student loan debt burden their children may have to bear 
after graduation. We should be worried too--ensuring that higher 
education is affordable is critical to our nation's ability to maintain 
its competitiveness in a global economy. Highly trained, skilled 
workers making good wages are the engine that powers our economy, both 
because of the work they do and the revenue they generate as both 
buyers and sellers of goods and services.
  The College Tuition Assistance Act will help families in four key 
ways:
  First, it will help them pay tuition expenses while students are in 
school, by increasing the value of the current Lifetime Learning 
Credit. Under my bill, while a student is in college, a family would be 
eligible for a tax credit or tax deduction worth as much as $2,800 
toward the first $10,000 in tuition and fees they pay each year. In 
addition, the adjusted income levels at which individuals and families 
qualify for the credit are raised so that more families would be 
eligible to receive this credit.
  Second, my bill would remove the requirement that Pell grants and 
other need-based government aid be subtracted from a family's eligible 
college expenses, allowing those families to qualify for some portion 
of the Lifetime Learning Credit. A problem under current law is that 
the value of need-based aid, such as a Pell grant, received by the 
child of a lower income family may reduce or even eliminate the 
family's eligibility for a tax credit based on tuition expenses. 
However, a recent study by the Congressionally-created Advisory 
Committee on Student Financial Assistance showed that, even after 
receiving need-based aid, students from low-income families have as 
much as $3,800 a year in ``unmet need,'' that is, college expenses that 
are not covered by assistance and which the family may be unable to 
afford. If families are permitted to subtract the value of their 
government aid from their eligible college expenses, they may qualify 
for the first time for the Lifetime Learning Credit and apply this 
money toward the costs of their college student's education. Without 
this help, many students from low-income families might not attend 
college; the Advisory Committee's report says that, because of the 
financial barriers, even the most highly qualified students from low-
income families attend college at a rate that is 20 percent lower than 
equally qualified students from the wealthiest families. For less 
qualified students, this differential is nearly 40 percent.
  Third, the costs of higher education continue to be a burden for many 
students even after graduation, as their student loans come due and 
they find a significant portion of their disposable income going to pay 
interest on these loans. Some graduates find that, even with their 
higher salary, they cannot afford many of the basic things they would 
like to acquire as adults, such as home or car purchases or even 
starting a new family. The College Tuition Assistance Act will expand 
the current tax law in three ways to provide more help offsetting the 
interest costs associated with repayment of student loans after 
graduation. This bill will remove the current five year limit on 
deductions of student loan interest, it will raise the adjusted income 
levels so more individuals and families can qualify for this deduction, 
and it will allow the deduction to be taken for each student in the 
family who owes interest on college loans.
  Finally, studies repeatedly show that the purchasing power of the 
Pell grant itself has been significantly eroded. Recent reports issued 
by the College Board and the American Council on Education show that in 
academic year 1975-1976, the maximum Pell grant covered 78 percent of 
the price of attending a public four-year college; for the current 
academic year, the maximum grant is enough to cover only 39 percent of 
these costs. We must do a better job of funding this crucial assistance 
to low-income students. President Bush, during last year's campaign, 
pledged to increase the maximum Pell grant for first-year students to 
$5,100 from its current level of $3,300. While many experts do not 
support the notion of ``front-loading'' by increasing

[[Page S4950]]

aid only to first-year students, this was at least a significant 
proposed increase in Pell grant funding. The College Tuition Assistance 
Act will encourage meaningful increases in the maximum Pell grant by 
raising the authorization level for academic years 2001-2002 and 2002-
2003 to $5,800.
  A college degree is a basic necessity in our Innovation Economy and a 
family's financial status should not be the determining factor in 
whether a young person joins society with the advantages of higher 
education or not. I hope, with the support of my colleagues, that we 
can pass the College Tuition Assistance Act in order to ease the burden 
middle and lower income families and their children bear on their way 
to success.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 888

       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 ``College Tuition Assistance 
     Act of 2001''.

     SEC. 2. DEDUCTION FOR HIGHER EDUCATION EXPENSES.

       (a) Deduction Allowed.--Part VII of subchapter B of chapter 
     1 of the Internal Revenue Code of 1986 (relating to 
     additional itemized deductions for individuals) is amended by 
     redesignating section 222 as section 223 and by inserting 
     after section 221 the following:

     ``SEC. 222. HIGHER EDUCATION EXPENSES.

       ``(a) Allowance of Deduction.--
       ``(1) In general.--In the case of an individual, there 
     shall be allowed as a deduction an amount equal to the 
     applicable dollar amount of the qualified tuition and related 
     expenses paid by the taxpayer during the taxable year.
       ``(2) Applicable dollar amount.--The applicable dollar 
     amount for any taxable year shall be determined as follows:

                                                             Applicable
``Taxable year:                                          dollar amount:
  2002......................................................$5,000 ....

  2003 and thereafter......................................$10,000.....

       ``(b) Limitation Based on Modified Adjusted Gross Income.--
       ``(1) In general.--The amount which would (but for this 
     subsection) be taken into account under subsection (a) shall 
     be reduced (but not below zero) by the amount determined 
     under paragraph (2).
       ``(2) Amount of reduction.--The amount determined under 
     this paragraph equals the amount which bears the same ratio 
     to the amount which would be so taken into account as--
       ``(A) the excess of--
       ``(i) the taxpayer's modified adjusted gross income for 
     such taxable year, over
       ``(ii) $50,000 ($100,000 in the case of a joint return), 
     bears to
       ``(B) $10,000 ($20,000 in the case of a joint return).
       ``(3) Modified adjusted gross income.--For purposes of this 
     subsection, the term `modified adjusted gross income' means 
     the adjusted gross income of the taxpayer for the taxable 
     year determined without regard to this section and sections 
     911, 931, and 933.
       ``(4) Adjustments for inflation.--
       ``(A) In general.--In the case of a taxable year beginning 
     after 2001, the $50,000 and $100,000 amounts in paragraph 
     (2)(A)(ii) 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, determined by substituting `calendar year 2000' 
     for `calendar year 1992' in subparagraph (B) thereof.
       ``(B) Rounding.--If any amount as adjusted under 
     subparagraph (A) is not a multiple of $1,000, such amount 
     shall be rounded to the next lowest multiple of $1,000.
       ``(c) Qualified Tuition and Related Expenses.--For purposes 
     of this section, the term `qualified tuition and related 
     expenses' has the meaning given such term by section 
     25A(f)(1) (determined with regard to section 25A(c)(2)(B)).
       ``(d) Special Rules.--
       ``(1) Identification requirement.--No deduction shall be 
     allowed under subsection (a) to a taxpayer with respect to 
     the qualified tuition and related expenses of an individual 
     unless the taxpayer includes the name and taxpayer 
     identification number of such individual on the return of tax 
     for the taxable year.
       ``(2) 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 to the extent credit is 
     elected.--No deduction shall be allowed under subsection (a) 
     for a taxable year with respect to the qualified tuition and 
     related expenses of an individual to the extent the taxpayer 
     elects to have section 25A apply with respect to such 
     expenses 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 tuition and 
     related 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.
       ``(3) Limitation on taxable year of deduction.--
       ``(A) In general.--A deduction shall be allowed under 
     subsection (a) for qualified tuition and related 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 tuition and related 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.
       ``(4) Adjustment for certain scholarships and veterans 
     benefits.--The amount of qualified tuition and related 
     expenses otherwise taken into account under subsection (a) 
     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) or needs-
     based aid received under part A of title IV of the Higher 
     Education Act of 1965) 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.
       ``(5) 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.
       ``(6) 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.
       ``(7) 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.--
     Section 62(a) of the Internal Revenue Code of 1986 is amended 
     by inserting after paragraph (17) the following:
       ``(18) Higher education expenses.--The deduction allowed by 
     section 222.''.
       (c) Conforming Amendment.--The table of sections for part 
     VII of subchapter B of chapter 1 of the Internal Revenue Code 
     of 1986 is amended by striking the item relating to section 
     222 and inserting the following:

``Sec. 222. Higher education expenses.
``Sec. 223. Cross reference.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to expenses paid after December 31, 2001 (in 
     taxable years ending after such date), for education 
     furnished in academic periods beginning after such date.

     SEC. 3. EXPANSION OF LIFETIME LEARNING CREDIT.

       (a) In General.--Section 25A(c)(1) of the Internal Revenue 
     Code of 1986 (relating to lifetime learning credit) is 
     amended by striking ``20 percent'' and inserting ``28 
     percent''.
       (b) Increase in AGI Limits.--
       (1) In general.--Subsection (d) of section 25A of the 
     Internal Revenue Code of 1986 is amended to read as follows:
       ``(d) Limitation Based on Modified Adjusted Gross Income.--
       ``(1) Hope credit.--
       ``(A) In general.--The amount which would (but for this 
     subsection) be taken into account under subsection (a)(1) 
     shall be reduced (but not below zero) by the amount 
     determined under subparagraph (B).
       ``(B) Amount of reduction.--The amount determined under 
     this subparagraph equals the amount which bears the same 
     ratio to the amount which would be so taken into account as--
       ``(i) the excess of--

       ``(I) the taxpayer's modified adjusted gross income for 
     such taxable year, over
       ``(II) $40,000 ($80,000 in the case of a joint return), 
     bears to

       ``(ii) $10,000 ($20,000 in the case of a joint return).
       ``(2) Lifetime learning credit.--
       ``(A) In general.--The amount which would (but for this 
     subsection) be taken into account under subsection (a)(2) 
     shall be reduced (but not below zero) by the amount 
     determined under subparagraph (B).
       ``(B) Amount of reduction.--The amount determined under 
     this subparagraph equals the amount which bears the same 
     ratio to

[[Page S4951]]

     the amount which would be so taken into account as--
       ``(i) the excess of--

       ``(I) the taxpayer's modified adjusted gross income for 
     such taxable year, over
       ``(II) $50,000 ($100,000 in the case of a joint return), 
     bears to

       ``(ii) $10,000 ($20,000 in the case of a joint return).
       ``(3) Modified adjusted gross income.--For purposes of this 
     subsection, the term `modified adjusted gross income' means 
     the adjusted gross income of the taxpayer for the taxable 
     year increased by any amount excluded from gross income under 
     section 911, 931, or 933.''.
       (2) Conforming amendment.--Section 25A(h)(2)(A) of such 
     Code is amended by striking ``subsection (d)(2)'' and 
     inserting ``subsection (d)(1)(B) and the $50,000 and $100,000 
     amounts in subsection (d)(2)(B)''.
       (c) Use of Certain Needs-Based Aid for Qualified 
     Expenses.--Section 25A(g)(2)(C) of the Internal Revenue Code 
     of 1986 (relating to adjustment for certain scholarships , 
     etc.) is amended by inserting ``or needs-based aid received 
     under part A of title IV of the Higher Education Act of 
     1965'' after ``section 102(a)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to expenses paid after December 31, 2001 (in 
     taxable years ending after such date), for education 
     furnished in academic periods beginning after such date.

     SEC. 4. EXPANSION OF STUDENT LOAN INTEREST DEDUCTION.

       (a) Per Student Basis.--
       (1) In general.--Section 221(b)(1) of the Internal Revenue 
     Code of 1986 (relating to maximum deduction) is amended by 
     inserting ``with respect to qualified education loans of each 
     eligible student'' after ``paragraph (2),''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply with respect to any loan interest paid after 
     December 31, 2001, in taxable years ending after such date.
       (b) Elimination of 60-Month Limit.--
       (1) In general.--Section 221 of the Internal Revenue Code 
     of 1986 (relating to interest on education loans) is amended 
     by striking subsection (d) and by redesignating subsections 
     (e), (f), and (g) as subsections (d), (e), and (f), 
     respectively.
       (2) Conforming amendment.--Section 6050S(e) of such Code is 
     amended by striking ``section 221(e)(1)'' and inserting 
     ``section 221(d)(1)''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply with respect to any loan interest paid after 
     December 31, 2001, in taxable years ending after such date.
       (c) Increase in Income Limitation.--
       (1) In general.--Section 221(b)(2)(B) of the Internal 
     Revenue Code of 1986 (relating to amount of reduction) is 
     amended by striking clauses (i) and (ii) and inserting the 
     following:
       ``(i) the excess of--

       ``(I) the taxpayer's modified adjusted gross income for 
     such taxable year, over
       ``(II) $40,000 ($80,000 in the case of a joint return), 
     bears to

       ``(ii) $15,000 ($20,000 in the case of a joint return).''.
       (2) Conforming amendment.--Section 221(g)(1) of such Code 
     is amended by striking ``$60,000'' and inserting ``$80,000''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years ending after December 31, 2001.

     SEC. 5. PELL GRANTS.

       Section 401(b)(2)(A) of the Higher Education Act of 1965 
     (20 U.S.C. 1070a(b)(2)(A)) is amended--
       (1) in clause (iii), by striking ``$5,100'' and inserting 
     ``$5,800''; and
       (2) in clause (iv), by striking ``$5,400'' and inserting 
     ``$5,800''.
                                 ______