Office of House Bill AnalysisH.B. 1938
By: Solis, Jim
Higher Education


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.
House Bill 1938 limits the authority for making education loans to  Texas
nonprofit corporations that have already established a record of servicing
loans under the Texas Higher Education Authority Act. 


It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 


House Bill 1938 amends the Education Code to prohibit an education loan
that is not made under the Higher Education Act of 1965 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 Federal PLUS
loans for which a student borrower may be eligible.  The bill provides that
an education loan is subject to provisions governing consumer loans, except
that it is prohibited for the maximum interest rate on the loan to exceed
the interest rate ceiling.  The bill also provides that the interest rate
on the loan may be computed by spreading  all interest contracted for,
charged, or received during the stated term of the loan. 

To be eligible to exercise bonding or borrowing powers on behalf of a city
or cities, the bill requires a nonprofit corporation to have issued bonds
before January 1, 2001 that qualified as qualified student loan bonds under
the Internal Revenue Code of 1986. 

The bill authorizes a nonprofit corporation, whether acting at the request
of a city or cities, acting as an education loan servicer or administrator
for another corporation that makes education loans, or that on its own
behalf issues securities or otherwise obtains funds to purchase or make
education loans, to make or purchase education loans and issue securities
or notes to obtain funds for that purpose.                       

The bill provides that an authority or nonprofit corporation making
education loans is exempt from licensing requirements under provisions
governing consumer loans.  The bill removes provisions relating to the
custody of student or parent loan notes.           


On passage, or if the Act does not receive the necessary vote, the Act
takes effect September 1, 2001.