Students and Families Empowerment Act
This bill expands tax deductions and grace periods that apply to student loan payments.
The bill modifies the tax deduction for interest on education loans to replace the dollar limitation and the limitation based on modified adjusted gross income with a $750,000 limit ($1.5 million in the case of a joint return) on the aggregate amount of qualified education loans that may be taken into account for the deduction.
The bill excludes from gross income the discharge of any student loan debt pursuant to income contingent and income-based repayment plans under the Higher Education Act of 1965.
The bill extends from 6 months to 12 months (1) the grace period before payment must begin on Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans after the student ceases to carry at least one-half of the normal full-time academic workload, and (2) the deferment periods for parent borrowers and graduate or professional student borrowers with Federal Direct PLUS Loans.
The bill prohibits interest from accruing on a Federal Direct Unsubsidized Stafford Loan or a Federal Direct PLUS Loan during the 12-month extension or deferral period.
To amend the Internal Revenue Code of 1986 to increase the deduction 
  allowed for student loan interest and to exclude from gross income 
     discharges of income contingent or income-based student loan 
                             indebtedness.

    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 ``Students and Families Empowerment 
Act''.

SEC. 2. INCREASE IN DEDUCTION FOR STUDENT LOAN INTEREST.

    (a) Dollar Limitation and Limitation Based on Income Replaced With 
Limitation on Aggregate Education Indebtedness That May Be Taken Into 
Account.--Section 221(b) of the Internal Revenue Code of 1986 is 
amended to read as follows:
    ``(b) Limitation on Aggregate Education Indebtedness That May Be 
Taken Into Account.--The aggregate amount taken into account under 
subsection (a) as qualified education loans for any period shall not 
exceed $750,000 (twice such amount in the case of a joint return).''.
    (b) Conforming Amendments.--Section 221 of such Code is amended by 
striking subsections (e) and (f) (relating to special rules and 
inflation adjustments, respectively) and inserting the following new 
subsection:
    ``(e) Denial of Double Benefit.--No deduction shall be allowed 
under this section for any amount for which a deduction is allowable 
under any other provision of this chapter.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 3. EXCLUSION FROM GROSS INCOME FOR DISCHARGE OF INCOME CONTINGENT 
              AND INCOME-BASED STUDENT LOAN INDEBTEDNESS.

    (a) In General.--Paragraph (1) of section 108(f) of the Internal 
Revenue Code of 1986 is amended to read as follows:
            ``(1) In general.--In the case of an individual, gross 
        income does not include any amount which (but for this 
        subsection) would be includible in gross income by reason of 
        the discharge (in whole or in part) of any student loan if such 
        discharge was pursuant to--
                    ``(A) a provision of such loan under which all or 
                part of the indebtedness of the individual would be 
                discharged if the individual worked for a certain 
                period of time in certain professions for any of a 
                broad class of employers, or
                    ``(B) subsections (d)(1)(D) and (e)(7) of section 
                455 or section 493C(b)(7) of the Higher Education Act 
                of 1965 (relating to income contingent and income-based 
                repayment, respectively).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to discharges of indebtedness after the date of the enactment of 
this Act.

SEC. 4. GRACE PERIOD EXTENSION.

    (a) In General.--Section 455 of the Higher Education Act of 1965 
(20 U.S.C. 1087e) is amended by adding at the end the following:
    ``(r) Grace Period Extension.--
            ``(1) In general.--With respect to the Federal Direct 
        Stafford Loans and Federal Direct Unsubsidized Stafford Loans, 
        section 487(b)(7) shall be applied--
                    ``(A) in subparagraph (A), by substituting `12 
                months' for `6 months'; and
                    ``(B) in subparagraph (D), by substituting `12-
                month period' for `6-month period'.
            ``(2) No accrual of interest.--Notwithstanding any other 
        provision of this part, interest shall not accrue on a Federal 
        Direct Unsubsidized Stafford Loan during the 12-month period 
        described in paragraph (1).
    ``(s) Extension of Certain Deferment Period for Federal Direct PLUS 
Loans.--
            ``(1) In general.--With respect to Federal Direct PLUS 
        Loans, section 428B(d)(1)(B) shall be applied--
                    ``(A) in the case of a parent borrower, in clause 
                (i), by substituting `12-month period' for `6-month 
                period'; and
                    ``(B) in the case of a graduate or professional 
                student borrower, in clause (ii), by substituting `12-
                month period' for `6-month period'.
            ``(2) No accrual of interest.--Notwithstanding any other 
        provision of this part, interest shall not accrue on a Federal 
        Direct PLUS Loan during the 12-month period described in 
        paragraph (1).''.
    (b) Effective Date and Application.--The amendments made by this 
section shall take effect on the date of enactment of this Act, and 
shall apply with respect to--
            (1) Federal Direct Stafford Loans, Federal Direct 
        Unsubsidized Stafford Loans, and Federal Direct PLUS Loans made 
        on or after the date of enactment of this Act; and
            (2) Federal Direct Stafford Loans, Federal Direct 
        Unsubsidized Stafford Loans, and Federal Direct PLUS Loans made 
        before such date of enactment to borrowers who have not yet 
        entered repayment on such loans on such date of enactment.
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Students and Families Empowerment Act
To amend the Internal Revenue Code of 1986 to increase the deduction allowed for student loan interest and to exclude from gross income discharges of income contingent or income-based student loan indebtedness.
Students and Families Empowerment Act
Rep. Rice, Kathleen M.