1-1 AN ACT
1-2 relating to education loans made or financed by a higher education
1-3 authority or nonprofit corporation.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 53.47, Education Code, is amended to read
1-6 as follows:
1-7 Sec. 53.47. GUARANTEED STUDENT LOANS AND ALTERNATE EDUCATION
1-8 LOANS; BONDS FOR THE PURCHASE OF EDUCATION LOAN NOTES. (a) In this
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: __________________________
Date
__________________________
Governor