To amend the Internal Revenue Code of 1986 to restore the prior law exclusion for scholarships and fellowships and to restore the deduction for interest on educational loans.

Repeals provisions of the Tax Reform Act of 1986 that restrict the types of scholarships and fellowship grants that may be excluded from gross income for income tax purposes.

Amends the Internal Revenue Code to allow an income tax deduction for interest on a qualified educational loan incurred to pay the educational expenses of the taxpayer, spouse, or dependent. Eliminates the current requirement that such indebtedness be secured by an interest in real property.