A bill to amend the Internal Revenue Code of 1954 to provide for the issuance of, and the exclusion from income of interest on, educational savings bonds.

Amends the Internal Revenue Code to exclude from gross income interest or investment yield on an educational savings bond to the extent that the yield is equal to or less than the expenses incurred by the taxpayer for the tuition and fees of dependents at higher educational institutions during the taxable year. Defines "educational savings bond" as a bond issued under the Second Liberty Bond Act which pays interest only on redemption, pays no interest if redeemed within 12 months, matures after 20 years and is not transferable.