By Solis, Gutierrez, Raymond,                         H.B. No. 1938
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to education loans made or financed by a higher education
 1-3     authority or nonprofit corporation.
 1-5           SECTION 1. Section 53.47, Education Code, is amended to read
 1-6     as follows:
 1-8     EDUCATION LOAN NOTES. (a)  In this section:
 1-9                 (1)  "Accredited institution" means an institution that
1-10     has either been recognized by a recognized accrediting agency, as
1-11     defined by Section 61.003, or accredited by the Accrediting
1-12     Commission for Independent Colleges and Schools, the Accrediting
1-13     Commission for Career Schools and Colleges of Technology, or the
1-14     National Accrediting Commission of Cosmetology Arts and Sciences.
1-15                 (2)  "Cost of attendance" means all costs of a student
1-16     incurred in connection with a program of study at an accredited
1-17     institution, as determined by the institution, including tuition
1-18     and instructional fees, the cost of room and board, books,
1-19     computers, and supplies, and other related fees, charges, and
1-20     expenses.
1-21                 (3)  "Education loan" means a loan that is made:
1-22                       (A)  by an eligible lender under the Higher
1-23     Education Act of 1965 (Pub. L. No. 89-329); or
1-24                       (B)  to or for the benefit of a student for the
1-25     purpose of financing all or part of the student's cost of
 2-1     attendance at an accredited institution.
 2-2                 (4)  "Qualified education loan lender" means a
 2-3     nonprofit corporation incorporated under the laws of this state
 2-4     that:
 2-5                       (A)  is a qualified nonprofit corporation;
 2-6                       (B)  has serviced education loans made under the
 2-7     Higher Education Act of 1965 for a qualified nonprofit corporation
 2-8     for a period of not less than 10 years; or
 2-9                       (C)  is a charitable organization qualified under
2-10     Section 509(a)(2), Internal Revenue Code of 1986, as amended, that
2-11     provides services to a qualified nonprofit corporation.
2-12                 (5)  "Qualified nonprofit corporation" means a
2-13     nonprofit corporation:
2-14                       (A)  that issued bonds on or after January 1,
2-15     1990, and before January 1, 2001, that qualified as qualified
2-16     student loan bonds under Section 144(b), Internal Revenue Code of
2-17     1986, as amended; or
2-18                       (B)  that the Bond Review Board has determined
2-19     meets a need for federally guaranteed student loan financing that
2-20     existing qualified nonprofit corporations cannot meet, as
2-21     determined by the Bond Review Board following a hearing based on
2-22     the following factors:
2-23                             (i)  the geographic coverage of existing
2-24     qualified nonprofit corporations;
2-25                             (ii)  the willingness of existing qualified
2-26     nonprofit corporations to serve the eligible lenders proposed to be
2-27     served; and
 3-1                             (iii)  the ability of existing qualified
 3-2     nonprofit corporations to serve the eligible lenders proposed to be
 3-3     served.
 3-4           (b)  An authority that is a qualified nonprofit corporation
 3-5     may, upon approval of the city or cities which created the same,
 3-6     issue revenue bonds or otherwise borrow money to obtain funds to
 3-7     purchase or to make education loans that [student or parent loan
 3-8     notes which] are guaranteed under the provisions of the Higher
 3-9     Education Act of 1965 [(Public Law 89-329)].  Revenue bonds issued
3-10     for such purpose shall be issued in accordance with and with the
3-11     effect provided in this chapter, except Section 53.36 shall not
3-12     apply, as this [said] chapter has been modified by Chapter 1204,
3-13     Government Code, and Subchapters A and D, Chapter 1207, Government
3-14     Code [3, Acts of the 61st Legislature, Regular Session, 1969, as
3-15     amended (Article 717k-2, Vernon's Texas Civil Statutes), and by
3-16     Chapter 784, Acts of the 61st Legislature, Regular Session, 1969
3-17     (Article 717k-3, Vernon's Texas Civil Statutes)].  Such bonds shall
3-18     be payable from and secured by a pledge of revenues derived from or
3-19     by reason of the ownership of education loans [student or parent
3-20     loan notes] and investment income after deduction of such expenses
3-21     of [or] operating the loan program as may be specified by the bond
3-22     resolution or trust indenture.
3-23           (c) [(b)]  An authority [that is not an eligible lender under
3-24     the Higher Education Act of 1965, acting through a bank with trust
3-25     powers,] may cause money to be expended to make or purchase for its
3-26     account education loans [student or parent loan notes] that are
3-27     guaranteed by the Texas Guaranteed Student Loan Corporation or that
 4-1     are executed by or on behalf of students who (1) are residents of
 4-2     this state or (2) [who] have been admitted to attend an accredited
 4-3     institution within this state.  [An accredited institution shall
 4-4     mean an institution which has either been recognized by a
 4-5     recognized accrediting agency, as defined by Section 61.003(12) of
 4-6     the Texas Education Code, or accredited by the Association of
 4-7     Independent Colleges and Schools, the National Association of Trade
 4-8     and Technical Schools, or the National Accrediting Commission of
 4-9     Cosmetology Arts and Sciences.]
4-10           (d)  An education loan made under this section that is not
4-11     made under the Higher Education Act of 1965 may be made only by a
4-12     qualified education loan lender and may not be in an amount in
4-13     excess of the difference between the cost of attendance and the
4-14     amount of other student assistance to the student,  other than
4-15     loans under Section 428B(a)(1), Higher Education Act of 1965 (20
4-16     U.S.C. Section 1078-2) (relating to parent loans), for which the
4-17     student borrower may be eligible.  An education loan covered by
4-18     this subsection is subject to Chapter 342, Finance Code, as
4-19     applicable, except that:
4-20                 (1)  the maximum interest rate on the loan may not
4-21     exceed the rate permitted under Subchapter A, Chapter 303, Finance
4-22     Code; and
4-23                 (2)  application and originating fees may be agreed to
4-24     by the parties and assessed at the inception of the loan, provided
4-25     that if any such fees constitute additional interest under
4-26     applicable law, the effective rate of interest agreed to over the
4-27     stated term of the loan may not exceed the rate allowed by
 5-1     Subchapter A, Chapter 303, Finance Code, and accrued unpaid
 5-2     interest may be added to unpaid principal at the beginning of the
 5-3     agreed repayment period at the borrower's option and in accordance
 5-4     with the terms of the agreement for purposes of determining the
 5-5     total principal amount due at the inception of the repayment
 5-6     period.
 5-7           (e) [(c)]  The authority shall contract with a nonprofit
 5-8     corporation, organized under the laws of this state, whereby such
 5-9     corporation will provide the reports and other information required
5-10     for continued participation in the federally guaranteed loan
5-11     program provided by the Higher Education Act of 1965 [(Public Law
5-12     89-329)].  [The custody of student or parent loan notes, purchased
5-13     by the bank on behalf of the authority, shall remain under the
5-14     control of a bank with trust powers.]
5-15           (f) [(d)]  The authority, as a municipal corporation of the
5-16     state, is charged with a portion of the responsibility of the state
5-17     to provide educational opportunities in keeping with all applicable
5-18     state and federal laws.  Nothing in this section shall be construed
5-19     as a prohibition against establishing policies to limit the
5-20     purchase of education loans to education loans [notes to notes]
5-21     executed by students attending school in a certain geographical
5-22     area or by students who are residents of the area.
5-23           (g) [(e)]  In addition to establishing an authority under the
5-24     provisions of this chapter, the governing body of a city or cities
5-25     may request a qualified nonprofit corporation [organized] to
5-26     exercise the powers enumerated and provided in this section for and
5-27     on its behalf.  If the qualified nonprofit corporation agrees to
 6-1     exercise such powers, the directors of such corporation shall
 6-2     thereafter be appointed by and be subject to removal by the
 6-3     governing body of the city or cities, and except as provided in
 6-4     this section, Sections 53.14, 53.15,  53.31, 53.32, 53.38, and
 6-5     53.41 through 53.43 [of the Texas Education Code shall] apply to
 6-6     and govern such corporation, its procedures, and bonds.
 6-7     Notwithstanding the provisions of Section 53.42, a qualified
 6-8     nonprofit corporation which has been requested to exercise the
 6-9     powers enumerated and requested in this section may invest or cause
6-10     a trustee or custodian on behalf of such qualified nonprofit
6-11     corporation[,] to invest its funds, including the proceeds of any
6-12     bonds, notes, or other obligations issued by such qualified
6-13     nonprofit corporation and any monies which are pledged to the
6-14     payment thereof, in:
6-15                 (1)  certificates of deposit or other time or demand
6-16     accounts of banks and savings and loan associations which are
6-17     insured by the Federal Deposit Insurance Corporation [or the
6-18     Federal Savings and Loan Insurance Corporation], provided the
6-19     amount of any certificate of deposit in excess of that covered by
6-20     such insurance must be secured by a first and prior pledge of
6-21     government obligations having a market value of not less than 100
6-22     percent of the excess unless a nationally recognized rating agency
6-23     has given the senior securities of the bank issuing the certificate
6-24     of deposit the highest or next to the highest investment rating
6-25     available;
6-26                 (2)  repurchase agreements;
6-27                 (3)  education loans [investment securities, as defined
 7-1     by Chapter 726, Acts of the 67th Legislature, Regular Session, 1981
 7-2     (Article 2529b-1, Vernon's Texas Civil Statutes);]
 7-3                 [(4)  a collective investment fund that is created as
 7-4     provided by Regulation 9 of the Office of the Comptroller of the
 7-5     Currency and that is invested in one or more types of investment
 7-6     securities or repurchase agreements;]
 7-7                 [(5)  an investment authorized by Subchapter A, Chapter
 7-8     2256, Government Code]; or
 7-9                 (4) [(6)]  a security issued by another nonprofit
7-10     corporation acting under this section.
7-11           (h) [(f)]  A nonprofit corporation, whether acting at the
7-12     request of a city or cities under Subsection (g) or acting as an
7-13     education loan servicer or administrator for another corporation
7-14     that makes education loans under this section, [(e)] or that on its
7-15     own behalf[, that] issues securities or otherwise obtains [to
7-16     obtain] funds to purchase or make education [student or parent]
7-17     loans, may:
7-18                 (1)  exercise the powers granted by the Texas
7-19     Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
7-20     Texas Civil Statutes);
7-21                 (2)  service loans purchased or made from its funds or
7-22     contract with another person to service the loans;
7-23                 (3)  grant a security interest in a trust estate
7-24     securing its securities;
7-25                 [(4)  purchase or make a student or parent loan that is
7-26     guaranteed or insured, in whole or part, by one or more persons
7-27     engaged in guaranteeing or insuring student or parent loans,
 8-1     including any agency of the federal government;]  and
 8-2                 (4) [(5)]  make investments as authorized by Subsection
 8-3     (g) [(e)].
 8-4           (i) [(g)]  A security interest in a trust estate granted
 8-5     under Subsection (h)(3) [(f)(3)] is attached and perfected at the
 8-6     time the security interest is executed and delivered by the
 8-7     nonprofit corporation.  The security interest grants to the secured
 8-8     party a first prior perfected security interest in the trust estate
 8-9     for the benefit of the secured party without regard to the location
8-10     of the assets that constitute the trust estate.
8-11           (j)  An authority or nonprofit corporation making education
8-12     loans under this section is exempt from the licensing requirements
8-13     of Chapter 342, Finance Code.
8-14           (k)  Subsection (a)(5) expires September 1, 2003.  On or
8-15     after September 1, 2003, in this section, the term "qualified
8-16     nonprofit corporation" means any nonprofit corporation authorized
8-17     by a city to exercise the powers of an authority under this
8-18     section.
8-19           SECTION 2.  This Act takes effect immediately if it receives
8-20     a vote of two-thirds of all the members elected to each house, as
8-21     provided by Section 39, Article III, Texas Constitution.  If this
8-22     Act does not receive the vote necessary for immediate effect, this
8-23     Act takes effect September 1, 2001.