BILL ANALYSIS


                                                         S.B. 727
                                                       By: Sibley
                                                        Education
                                                          3-23-95
                                     Committee Report (Unamended)
BACKGROUND

Since the creation of the student loan note secondary markets
(markets), federal law with respect to the operation and financing
of markets has changed substantially.  The market program was
originally linked to only the "Guaranteed Student Loan" program as
authorized by federal law.  
Texas law has not been amended to keep pace with the federal law
changes.  As a result, an ambiguity exists regarding the true
nature of the Texas markets making it difficult to conclude that a
security interest granted by a Texas market is a prior, perfected
security interest.  Furthermore, the specificity in state law has
precluded Texas markets from assisting Texas students with their
higher education needs when federal law would otherwise allow them
to do so.

PURPOSE

As proposed, S.B. 727 eliminates the uncertainty regarding
perfection and priority of security interests granted by Texas
secondary markets in accordance with federal law and allow Texas
markets to participate in all loan programs.
  
RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 53.47, Education Code, by amending
Subsection (e) and adding Subsections (f) and (g), as follows:

     (e)    Authorizes a nonprofit corporation which has been
     requested to exercise the powers enumerated and requested in
     this section to invest or cause a trustee or custodian on
     behalf of such nonprofit corporation, to invest its funds,
     including the proceeds of any bonds, notes, or other
     obligations and any monies which are pledged to the payment
     thereof in an investment authorized by Chapter 2256A,
     Government Code, or a security issued by another nonprofit
     corporation acting under this section.  Makes nonsubstantive
     changes.
     
     (f)  Authorizes a nonprofit corporation, whether acting at the
     request of a city or cities under Subsection (e) or on its own
     behalf, that issues securities to obtain funds to purchase or
     make student or parent loans to exercise the powers granted by
     the Texas Non-Profit Corporation Act (Art. 1396-1.01 et seq.,
     V.T.C.S.); service loans purchased or made from its funds or
     contract with another person to service the loans; grant a
     security interest in a trust estate securing its securities;
     purchase or make a student or parent loan that is guaranteed
     or insured, in whole or part, by one or more persons engaged
     in guaranteeing or insuring student or parent loans, including
     any agency of the federal government; and make investments as
     authorized by Subsection (e).
     
     (g)  Provides that a security interest in a trust estate
     granted under Subsection (f)(3) is attached and perfected at
     the time the security interest is executed and delivered by
     the nonprofit corporation.  Provides that the security
     interest grants to the secured party a first prior perfected
     security interest in the trust estate for the benefit of the
     secured party without regard to the location of the assets
     that constitute the trust estate.
     
     SECTION 2.     Emergency clause.
           Effective date:  upon passage.