Deductibility and Incentives to Promote Learning Opportunities and Maximize Assistance (DIPLOMA) Act of 2006 - Amends the Internal Revenue Code to: (1) allow an unlimited tax deduction for qualified tuition and related expenses for taxpayers whose adjusted gross incomes do not exceed $80,000 ($160,000 for joint returns); (2) extend such deduction through 2010; (3) allow a tax deduction for principal amounts paid on education loans for the first 60 months of such loans; (4) replace the Hope Scholarship tax credit with an earned tuition tax credit for the first $1,500 of qualified tuition and related expenses (50% of expenses over $1,500 up to $4,000) for four years of postsecondary education; and (5) make the tax credit for earned tuition and lifetime learning expenses refundable.