BILL ANALYSIS H.B. 1157 By: Hunter, B. 03-01-95 Committee Report (Unamended) BACKGROUND The Texas Guaranteed Student Loan Corporation (TGSLC) was established in 1979 by the 66th Texas Legislature. This action was taken in response to recommendations submitted to the legislature by an interim study committee charged with the responsibility to study and recommend options for the State of Texas concerning the administration of the federal Guaranteed Student Loan Program (GSLP), renamed the Federal Family Educational Loan Program (FFELP) in 1993. The Texas Legislature settled on a plan to establish a public, non-profit corporation to carry out this responsibility. As a part of the 1993 Federal Budget Reconciliation, the 103rd Congress established the publicly-funded Federal Direct Student Loan Program (FDSLP). The FDSLP will provide institutions of higher education with direct loans on behalf of the federal government. In it anticipated that by 1998 the program will be phased-in. The FDSLP will handle 60% of the total student loan volume and 40% will be made through the existing 30 year-old privately funded FFELP. The FFELP and FDSLP compose the largest source of financial aid to postsecondary students. Combined, these programs generate $23 billion nationally in educational loans to 8 million students each year. In Texas, $800 million is loaned to 285,000 students. The FFELP are responsible for 84% of the student loans made in Texas and are guaranteed against default by state-designated agencies, with final insurance for borrower non-payment being the federal government's responsibility. The federal government has indicated at various times publicly and in discussions with the Texas Guaranteed Student Loan Corporation (TGSLC) that once the FDSLP is fully operational, only 5 to 10 guarantors will be needed to administer the FFELP. The TGSLC believes that it will be one of the surviving guarantors. Surviving guarantors will assume the FFELP responsibilities for Guaranteed Student Loan Corporations that are lost through attrition. To permit the TGSLC to assist the federal government in this way, several changes are required in the TGSLC's governing statute. PURPOSE This legislation will provide the Texas Guaranteed Student Loan Corporation with the authority to assist the federal government in administering the Federal Family Education Loan Program outside the boundaries of the State of Texas. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 57B, Education Code, Section 57.22 to read as follows: Sec. 57.22. APPLICATION OF THE TEXAS NON-PROFIT CORPORATION ACT. Allows the Texas Guaranteed Student Loan Corporation to merge or consolidate with another corporation. SECTION 2. Amends Chapter 57B, Education Code, Section 57.24(c) to read as follows: Sec. 57.24. AUTHORITY TO PARTICIPATE IN OTHER REVENUE-GENERATING ACTIVITIES; LIMITATIONS. Allows the Texas Guaranteed Student Loan Corporation to guarantee loans for other states. SECTION 3. Amends Chapter 57D, Education Code, Section 57.761 to read as follows: Sec. 57.761. INTERNAL AUDITOR. Clarifies the Texas Guaranteed Student Loan Corporation Internal Auditors reporting responsibility and creates conformity of the chief executive officer's title with that in Section 57.19 of the Texas Education Code. SECTION 4. Effective date: September 1, 1995. SECTION 5. Emergency Clause. SUMMARY OF COMMITTEE ACTION H.B. 1157 was considered by the committee in a public hearing on March 7, 1995. The following person testified in favor of the bill: Mr. George Torres, Texas Guaranteed Student Loan Corporation. The bill was reported favorable without amendment, with the recommendation that it do pass and be printed, by a record vote of 5 ayes, 0 nays, 0 pnv, 4 absent.