Enrolled Bill Summary

Senate Bill 40	Senate Author:  Zaffirini
Effective:  Vetoed	House Sponsor:  Callegari

            Senate Bill 40 amends Education Code provisions governing the Texas Guaranteed Student Loan Corporation to reset its scheduled abolishment under the Texas Sunset Act from September 1, 2017, to September 1, 2013; expand the corporation's purpose; broaden the corporation's authority to participate in revenue-sharing activities; and add or revise certain across-the-board provisions. The bill clarifies and expands the corporation's purpose to include administering student financial aid programs and other student loan programs, in addition to the guaranteed student loan program, for qualified students across the nation as well as in Texas; assisting institutions of higher education by providing necessary and desirable services related to financial aid and student loan programs; and participating in revenue-generating activities related to higher education student financial aid and student loan programs to the extent the activities support the corporation's primary purposes.

Senate Bill 40 makes the corporation subject to the state's open records law, increases the membership of its board of directors by requiring the appointment of an additional faculty member or administrator from a postsecondary educational institution that is an eligible institution for purposes of federal law, expands conflict-of-interest provisions rendering a person ineligible for board membership, and authorizes the board or a board committee to hold a meeting by telephone conference call under certain conditions.

            Senate Bill 40 clarifies the corporation's authority to participate in a revenue-generating activity by specifying a broad range of federal, state, and other entities with which the corporation may enter into contracts and by specifying certain services the corporation may perform if authorized by its board of directors to do so but conditions that authority on the revenue from the activity enabling the corporation to support educational purposes and the specified services being in relation to higher education loans.  The bill requires the corporation to submit a biennial written report to the legislature and the Legislative Budget Board regarding the corporation's participation in revenue-generating activities.

            Senate Bill 40 removes a provision requiring the corporation to guarantee loans made to eligible borrowers by eligible lenders as provided by the federal guaranteed student loan program and instead requires the corporation to serve as the designated guarantee agency under the Federal Family Education Loan Program in accordance with federal law.  The bill removes a requirement for the corporation to establish two advisory committees representing participating postsecondary educational institutions and participating lenders, respectively, and instead requires the corporation to establish advisory committees as the board considers appropriate. 

            Senate Bill 40 revises provisions relating to suits on student loan defaults, loan default prevention and reduction, the cooperation of state agencies and subdivisions in providing information concerning student financial aid, and discrimination in making a student loan or loan guarantee.  The bill requires the corporation to maintain a federal fund and operating fund in accordance with certain federal law, rather than reserve and operating funds, and requires a periodic review of the corporation's activities consistent with the state auditor's audit plan. 

            Senate Bill 40 repeals Education Code provisions relating to the comptroller's or the comptroller's designee's membership on the board; the board's delegation of powers to the president and corporation employees; the policy statement filed with the governor's office; the conditions under which the corporation is required to make student loans as a lender of last resort; reinsurance against loss under the loan program; insurance premiums imposed and collected by the corporation; eligibility requirements for borrowers, lenders, and institutions; and the calculation of loan default rates by the corporation and other provisions relating to such rates.

 

            Reason Given for Veto: "Senate Bill 40 would make a number of changes to the enabling statute of the Texas Guaranteed Student Loan Corporation (TGSLC), a state-chartered nonprofit corporation that serves as the guarantor for subsidized student loans originated under the Federal Family Education Loan Program (FFELP).  FFELP was terminated last year by the federal government.

 

            "Many of the changes in Senate Bill 40, such as allowing TGSLC board members to attend meetings via teleconference or requiring [TGSLC] to appoint an ombudsman for internal complaints, are good for TGSLC and the state.  However, their benefits are outweighed by other parts of the bill.

 

            "Senate Bill 40 gives TGSLC much broader authority to enter into revenue-generating activities, but does so at a time when TGSLC loan portfolio will shrink, limiting the resources available for new ventures and exposing TGSLC's operating fund to additional risk.

 

            "TGSLC also faces uncertainty at the federal level.  TGSLC is a strong guarantor, but it would be unwise to commit scarce resources without additional clarity as to future policies regarding guarantors and the residual FFELP portfolio.

 

            "Senate Bill 40 also contains language regarding the governor's appointments to TGSLC that conflicts with TGSLC language in other bills that are moving toward passage in the special session."