Senate Research Center   H.B. 1938
By: Solis, Jim (Bivins)


Higher Education Servicing Corporations service student loans of the six
higher education authorities in various parts of the state. These
authorities are nonprofit corporations and were established to provide
student loan access in the state of Texas. The authorities provide
liquidity to financial institutions that make student loans by purchasing
their guaranteed student loans, and funding their programs primarily
through the sale of tax-exempt bonds. In an effort to make sure that
student borrowers are protected against unreasonable fees, proponents seek
to designate reliable sources of long-term education loans so that Texas
students can afford to attend the college or university of their choice.
H.B. 1938 limits the authority for making education loans to qualified
Texas nonprofit corporations that have already established a record of
servicing loans under the Higher Education Authority Act.  


This bill does not expressly grant any additional rulemaking authority to a
state officer, institution, or agency. 


SECTION 1.  Amends Section 53.47, Education Code, as follows:

EDUCATION LOAN NOTES.  (a) Defines "accredited institution," "cost of
attendance," "education loan," "qualified education loan," and "qualified
nonprofit corporation."   

(b) Changes references from "authority" to "authority that is a qualified
nonprofit corporation," from "student or parent loan notes" to "education
loans," and "Chapter 3, Acts of the 61st Legislature, Regular Session,
1969, as amended (Article 717k-2, Vernon's Texas Civil Statutes), and by
Chapter 784, Acts of the 61st Legislature, Regular Session, 1969 (Article
717k-3, Vernon's Texas Civil Statutes)" to "Chapter 1204, Government Code,
and Subchapters A and D, Chapter 1207, Government Code."  Makes a
conforming change. 

(c) Deletes language relating to an authority that is not an eligible
lender under the Higher Education Act of 1965, acting through a bank with
trust powers.  Adds language to authorize an authority to cause money to be
expended to make for its account certain education loans.  Deletes language
defining "accredited institution" and makes a conforming change. 

(d)  Authorizes an education loan made under this section that is not made
under the Higher Education Act of 1965 to be made only by a qualified
education loan lender and prohibits it from being in an amount in excess of
the difference between the cost of attendance and the amount of other
student assistance to the student,  other than loans under Section
428B(a)(1), Higher Education Act of 1965 (20 U.S.C. Section 1078-2)
(relating to parent loans), for which the student borrower may be eligible.
Provides that  an education loan covered by this subsection is subject to
Chapter 342 (Consumer Loans), Finance Code, as applicable, except under
certain conditions. 

(e) Deletes language requiring the custody of student or parent loan notes,
purchased by the bank on behalf of the authority, to remain under the
control of a bank with trust powers. 

  (f) Makes a conforming change.

(g) Deletes a reference to the Federal Savings and Loan Insurance
Corporation, deletes references to certain investments, and makes
conforming changes. 

(h) Adds language to authorize a nonprofit corporation, whether acting at
the request of a city or cities under Subsection (g) or acting as an
education loan servicer or administrator for another corporation that makes
education loans under this section or that on its own behalf issues
securities or otherwise obtains funds to purchase or make education loans,
to carry out certain duties.  Deletes language authorizing a nonprofit
corporation to 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.  Makes a conforming change. 

  (i) Makes a conforming change.

(j) Provides that an authority or nonprofit corporation making education
loans under this section is exempt from the licensing requirements of
Chapter 342, Finance Code. 

(k) Provides that Subsection (a)(5) expires September 1, 2003.  Provides
that on or after September 1, 2003, in this section, the term "qualified
nonprofit corporation" means any nonprofit corporation authorized by a city
to exercise the powers of an authority under this section. 

SECTION 2.  Effective date: upon passage or September 1, 2001.