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:
 1-9     section:
1-10                 (1)  "Accredited institution" means an institution that
1-11     has either been recognized by a recognized accrediting agency, as
1-12     defined by Section 61.003, or accredited by the Accrediting
1-13     Commission for Independent Colleges and Schools, the Accrediting
1-14     Commission for Career Schools and Colleges of Technology, or the
1-15     National Accrediting Commission of Cosmetology Arts and Sciences.
1-16                 (2)  "Alternative education loan" means a loan other
1-17     than a guaranteed student loan that is made to or for the benefit
1-18     of a student for the purpose of financing all or part of the
1-19     student's cost of attendance at an accredited institution.
1-20                 (3)  "Cost of attendance" means all costs of a student
1-21     incurred in connection with a program of study at an accredited
1-22     institution, as determined by the institution, including tuition
1-23     and instructional fees, the cost of room and board, books,
1-24     computers, and supplies, and other related fees, charges, and
 2-1     expenses.
 2-2                 (4)  "Guaranteed student loan" means a loan made by an
 2-3     eligible lender under the Higher Education Act of 1965 (Pub. L. No.
 2-4     89-329), as amended.
 2-5                 (5)  "Qualified alternative education loan lender"
 2-6     means a nonprofit corporation incorporated under the laws of this
 2-7     state that:
 2-8                       (A)  is a qualified nonprofit corporation;
 2-9                       (B)  has serviced education loans made under the
2-10     Higher Education Act of 1965, as amended, for a qualified nonprofit
2-11     corporation for a period of not less than 10 years; or
2-12                       (C)  is a charitable organization qualified under
2-13     Section 509(a)(2), Internal Revenue Code of 1986, as amended, that
2-14     provides services to a qualified nonprofit corporation.
2-15                 (6)  "Qualified nonprofit corporation" means a
2-16     nonprofit corporation:
2-17                       (A)  that issued bonds on or after January 1,
2-18     1990, and before January 1, 2001, that qualified as qualified
2-19     student loan bonds under Section 144(b), Internal Revenue Code of
2-20     1986, as amended; or
2-21                       (B)  that the office of the governor, in
2-22     consultation with the state student loan guaranty agency or any
2-23     other public or private entity the office of the governor considers
2-24     appropriate, has determined meets a need for student loan financing
2-25     that existing qualified nonprofit corporations cannot meet, which
2-26     determination may include information provided by the nonprofit
2-27     corporation's plan for doing business that should include
 3-1     documented limitations in:
 3-2                             (i)  the geographic coverage of existing
 3-3     qualified nonprofit corporations in the nonprofit corporation's
 3-4     proposed area of service;
 3-5                             (ii)  the willingness of existing qualified
 3-6     nonprofit corporations to serve the eligible lenders in the
 3-7     proposed area of service; and
 3-8                             (iii)  the ability of existing qualified
 3-9     nonprofit corporations to serve the eligible lenders in the
3-10     proposed area of service.
3-11           (b)  An authority may, upon approval of the city or cities
3-12     which created the same, issue revenue bonds or otherwise borrow
3-13     money to obtain funds to purchase or to make guaranteed student
3-14     loans [student or parent loan notes which are guaranteed under the
3-15     provisions of the Higher Education Act of 1965 (Public Law
3-16     89-329)].  Revenue bonds issued for such purpose shall be issued in
3-17     accordance with and with the effect provided in this chapter,
3-18     except Section 53.36 shall not apply, as this [said] chapter has
3-19     been modified by Chapter 1204, Government Code, and Subchapters A
3-20     and D, Chapter 1207, Government Code [3, Acts of the 61st
3-21     Legislature, Regular Session, 1969, as amended (Article 717k-2,
3-22     Vernon's Texas Civil Statutes), and by Chapter 784, Acts of the
3-23     61st Legislature, Regular Session, 1969 (Article 717k-3, Vernon's
3-24     Texas Civil Statutes)].  Such bonds shall be payable from and
3-25     secured by a pledge of revenues derived from or by reason of the
3-26     ownership of guaranteed student loans [student or parent loan
3-27     notes] and investment income after deduction of such expenses of
 4-1     [or] operating the loan program as may be specified by the bond
 4-2     resolution or trust indenture.
 4-3           (c) [(b)]  An authority [that is not an eligible lender under
 4-4     the Higher Education Act of 1965, acting through a bank with trust
 4-5     powers,] may cause money to be expended to make or purchase for its
 4-6     account guaranteed student loans [student or parent loan notes]
 4-7     that are guaranteed by the Texas Guaranteed Student Loan
 4-8     Corporation or that are executed by or on behalf of students who
 4-9     (1) are residents of this state or (2) [who] have been admitted to
4-10     attend an accredited institution within this state.  [An accredited
4-11     institution shall mean an institution which has either been
4-12     recognized by a recognized accrediting agency, as defined by
4-13     Section 61.003(12) of the Texas Education Code, or accredited by
4-14     the Association of Independent Colleges and Schools, the National
4-15     Association of Trade and Technical Schools, or the National
4-16     Accrediting Commission of Cosmetology Arts and Sciences.]
4-17           (d) [(c)]  The authority shall contract with a nonprofit
4-18     corporation, organized under the laws of this state, whereby such
4-19     corporation will provide the reports and other information required
4-20     for continued participation in the federally guaranteed loan
4-21     program provided by the Higher Education Act of 1965, as amended
4-22     [(Public Law 89-329)].  [The custody of student or parent loan
4-23     notes, purchased by the bank on behalf of the authority, shall
4-24     remain under the control of a bank with trust powers.]
4-25           (e) [(d)]  The authority, as a municipal corporation of the
4-26     state, is charged with a portion of the responsibility of the state
4-27     to provide educational opportunities in keeping with all applicable
 5-1     state and federal laws.  Nothing in this section shall be construed
 5-2     as a prohibition against establishing policies to limit the
 5-3     purchase of guaranteed student loans to guaranteed student loans
 5-4     [notes to notes] executed by students attending school in a certain
 5-5     geographical area or by students who are residents of the area.
 5-6           (f) [(e)]  In addition to establishing an authority under the
 5-7     provisions of this chapter, the governing body of a city or cities
 5-8     may request a qualified nonprofit corporation [organized] to
 5-9     exercise the powers enumerated and provided in this section for and
5-10     on its behalf.  If the qualified nonprofit corporation agrees to
5-11     exercise such powers, the directors of such corporation shall
5-12     thereafter be appointed by and be subject to removal by the
5-13     governing body of the city or cities, and except as provided in
5-14     this section, Sections 53.14, 53.15,  53.31, 53.32, 53.38, and
5-15     53.41 through 53.43 [of the Texas Education Code shall] apply to
5-16     and govern such corporation, its procedures, and bonds.
5-17     Notwithstanding the provisions of Section 53.42, a qualified
5-18     nonprofit corporation which has been requested to exercise the
5-19     powers enumerated and requested in this section may invest or cause
5-20     a trustee or custodian on behalf of such qualified nonprofit
5-21     corporation[,] to invest its funds, including the proceeds of any
5-22     bonds, notes, or other obligations issued by such qualified
5-23     nonprofit corporation and any monies which are pledged to the
5-24     payment thereof, in:
5-25                 (1)  certificates of deposit or other time or demand
5-26     accounts of banks and savings and loan associations which are
5-27     insured by the Federal Deposit Insurance Corporation [or the
 6-1     Federal Savings and Loan Insurance Corporation], provided the
 6-2     amount of any certificate of deposit in excess of that covered by
 6-3     such insurance must be secured by a first and prior pledge of
 6-4     government obligations having a market value of not less than 100
 6-5     percent of the excess unless a nationally recognized rating agency
 6-6     has given the senior securities of the bank issuing the certificate
 6-7     of deposit the highest or next to the highest investment rating
 6-8     available;
 6-9                 (2)  repurchase agreements;
6-10                 (3)  guaranteed student loans and alternative education
6-11     loans [investment securities, as defined by Chapter 726, Acts of
6-12     the 67th Legislature, Regular Session, 1981 (Article 2529b-1,
6-13     Vernon's Texas Civil Statutes);]
6-14                 [(4)  a collective investment fund that is created as
6-15     provided by Regulation 9 of the Office of the Comptroller of the
6-16     Currency and that is invested in one or more types of investment
6-17     securities or repurchase agreements;]
6-18                 [(5)  an investment authorized by Subchapter A, Chapter
6-19     2256, Government Code]; or
6-20                 (4) [(6)]  a security issued by another nonprofit
6-21     corporation acting under this section.
6-22           (g) [(f)]  A nonprofit corporation, whether acting at the
6-23     request of a city or cities under Subsection (f) or acting as a
6-24     servicer or administrator for another corporation that purchases
6-25     guaranteed student loans, [(e)] or that on its own behalf[, that]
6-26     issues securities or otherwise obtains [to obtain] funds to
6-27     purchase or make guaranteed student loans or alternative education
 7-1     [student or parent] loans, may:
 7-2                 (1)  exercise the powers granted by the Texas
 7-3     Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
 7-4     Texas Civil Statutes);
 7-5                 (2)  service loans purchased or made from its funds or
 7-6     contract with another person to service the loans;
 7-7                 (3)  grant a security interest in a trust estate
 7-8     securing its securities;
 7-9                 [(4)  purchase or make a student or parent loan that is
7-10     guaranteed or insured, in whole or part, by one or more persons
7-11     engaged in guaranteeing or insuring student or parent loans,
7-12     including any agency of the federal government;]  and
7-13                 (4) [(5)]  make investments as authorized by Subsection
7-14     (f) [(e)].
7-15           (h) [(g)]  A security interest in a trust estate granted
7-16     under Subsection (g)(3) [(f)(3)] is attached and perfected at the
7-17     time the security interest is executed and delivered by the
7-18     nonprofit corporation.  The security interest grants to the secured
7-19     party a first prior perfected security interest in the trust estate
7-20     for the benefit of the secured party without regard to the location
7-21     of the assets that constitute the trust estate.
7-22           (i)  An alternative education loan may be made under this
7-23     section  only by a qualified alternative education loan lender.  An
7-24     alternative education loan may not be in an amount in excess of the
7-25     difference between the cost of attendance and the amount of other
7-26     student assistance to the student, other than loans under Section
7-27     428B(a)(1), Higher Education Act of 1965 (20 U.S.C. Section 1078-2)
 8-1     (relating to parent loans), for which the student borrower may be
 8-2     eligible.  An alternative education loan covered by this subsection
 8-3     is subject to Chapter 342, Finance Code, as applicable, except
 8-4     that:
 8-5                 (1)  the maximum interest rate on the loan may not
 8-6     exceed the rate permitted under Subchapter A, Chapter 303, Finance
 8-7     Code; and
 8-8                 (2)  application and origination fees may be agreed to
 8-9     by the parties and assessed at the inception of the loan, provided
8-10     that if any such fees constitute additional interest under
8-11     applicable law, the effective rate of interest agreed to over the
8-12     stated term of the loan may not exceed the rate allowed by
8-13     Subchapter A, Chapter 303, Finance Code, and accrued unpaid
8-14     interest may be added to unpaid principal at the beginning of the
8-15     agreed repayment period at the borrower's option and in accordance
8-16     with the terms of the agreement for purposes of determining the
8-17     total principal amount due at the inception of the repayment
8-18     period.
8-19           (j)  An authority or nonprofit corporation making education
8-20     loans under this section is exempt from the licensing requirements
8-21     of Chapter 342, Finance Code.
8-22           (k)  Subsection (a)(6) expires September 1, 2003.  On or
8-23     after September 1, 2003, in this section, the term "qualified
8-24     nonprofit corporation" means any nonprofit corporation authorized
8-25     by a city to exercise the powers of an authority under this
8-26     section.
8-27           SECTION 2.  This Act takes effect immediately if it receives
 9-1     a vote of two-thirds of all the members elected to each house, as
 9-2     provided by Section 39, Article III, Texas Constitution.  If this
 9-3     Act does not receive the vote necessary for immediate effect, this
 9-4     Act takes effect September 1, 2001.
         _______________________________     _______________________________
             President of the Senate              Speaker of the House
               I certify that H.B. No. 1938 was passed by the House on April
         18, 2001, by the following vote:  Yeas 147, Nays 0, 1 present, not
         voting; and that the House concurred in Senate amendments to H.B.
         No. 1938 on May 24, 2001, by the following vote:  Yeas 135, Nays 0,
         1 present, not voting.
                                                 Chief Clerk of the House
               I certify that H.B. No. 1938 was passed by the Senate, with
         amendments, on May 17, 2001, by the following vote:  Yeas 30, Nays
         0, 1 present, not voting.
                                                 Secretary of the Senate
         APPROVED:  __________________________