[Congressional Record Volume 151, Number 80 (Thursday, June 16, 2005)]
[Senate]
[Pages S6742-S6743]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. VOINOVICH (for himself, Mr. Akaka, Ms. Collins, Mr. 
        Durbin, and Mr. Stevens):
  S. 1255. A bill to amend the Internal Revenue Code of 1986 to exclude 
from gross income amounts paid on behalf of Federal employees and 
members of the Armed Forces on active duty under Federal student loan 
repayment programs; to the Committee on Finance.
  Mr. VOINOVICH. Mr. President, today I rise to introduce the 
Generating Opportunity by Forgiving Educational Debt for Service Act of 
2005, a bill that will help Federal agencies and the Armed Forces 
recruit talented individuals to serve in all areas of the Federal 
Government and the military. This legislation is a modestly expanded 
version of a bill I introduced in the 108th Congress.
  Current law authorizes Federal agencies to pay student loans up to 
$10,000 a year with a cumulative cap of $60,000, but the incentive is 
taxed. Known as GOFEDS, this bill would amend the Federal tax code and 
allow the Federal Government's student loan repayment programs to be 
offered on a tax-free basis.
  In recent years, many educational institutions have established 
programs that repay a portion of the student loan debt their graduates 
owe. These programs are designed to encourage students to seek jobs 
with government or non-profit organizations that cannot pay salaries 
commensurate with the private sector upon graduation. Under current 
law, the amounts these institutions offer their graduates as student 
loan repayment are not taxed as income, provided the recipients choose 
to work for the government or non-profit organizations.
  Unfortunately, the Federal Tax Code does not treat the Federal 
Government's loan repayment programs in the same way, considering such 
loan repayment as taxable income to the employee. As a result, the net 
benefit of any such program is reduced by the amount of tax that the 
individual has to pay on the debt repaid. This bill would amend the tax 
code so that the Government does not continue to undermine its own loan 
repayment recruitment incentive. This change will help Federal agencies 
recruit and retain well-qualified graduates.
  This Congress, I have expanded GOFEDS to our military because recent 
reports indicate that all four services missed their recruiting goals 
last year. Unfortunately, military recruiting levels are now at a 30-
year low. Under GOFEDS, military education loan programs, like the 
Active-Duty Loan Repayment Program will be offered on a tax free basis.
  With more than half of the Federal workforce eligible for retirement 
in the next 5 years and surveys showing that fewer Americans find 
government services attractive, the need for this legislation is even 
more necessary. I believe the cost of this bill is minimal, but its 
potential impact is great. I urge all of my colleagues to support this 
legislation and I am confident that it can be enacted this year.
  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. 1255

       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 ``Generating Opportunity by 
     Forgiving Educational Debt for Service Act of 2005''.

     SEC. 2. EXCLUSION FOR STUDENT LOAN REPAYMENTS BY THE FEDERAL 
                   GOVERNMENT.

       (a) Exclusion From Gross Income.--Section 108(f) of the 
     Internal Revenue Code of 1986 (relating to student loans) is 
     amended by adding at the end the following:
       ``(5) Student loan repayments by federal government.--In 
     the case of an individual, gross income does not include any 
     payments made by the Federal Government on behalf of such 
     individual under--
       ``(A)(i) section 5379 of title 5, United States Code; or
       ``(ii) any other similar Federal program for its employees; 
     or
       ``(B) section 510(e)(2), chapter 109, or chapter 1609 of 
     title 10, United States Code.''.
       (b) Exclusion From Wages.--
       (1) In general.--Section 3121(a) of such Code (defining 
     wages) is amended--
       (A) in paragraph (21), by striking ``or'' at the end;
       (B) in paragraph (22), by striking the period at the end 
     and inserting ``; or''; and
       (C) by inserting after paragraph (22) the following:
       ``(23) any payment excluded from gross income under section 
     108(f)(5) (relating to student loan repayments by the Federal 
     Government).''.
       (2) Social security act.--Section 209(a) of the Social 
     Security Act (42 U.S.C. 409(a)) is amended by adding at the 
     end the following:
       ``(20) Any payment excluded from gross income under section 
     108(f)(5) of the Internal Revenue Code of 1986 (relating to 
     student loan repayments by Federal Government).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to payments made on or after the date of 
     enactment of this Act in taxable years ending after such 
     date.

[[Page S6743]]

                                 ______