77R9868 JSA-F
By Solis, Gutierrez, Raymond H.B. No. 1938
Substitute the following for H.B. No. 1938:
By Rangel C.S.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.
1-4 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. EDUCATION LOANS; BONDS FOR THE PURCHASE OF
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
2-1 purpose of financing all or part of the student's cost of
2-2 attendance at an accredited institution.
2-3 (4) "Qualified education loan lender" means a
2-4 nonprofit corporation incorporated under the laws of this state
2-5 that:
2-6 (A) is a qualified nonprofit corporation;
2-7 (B) has serviced education loans made under the
2-8 Higher Education Act of 1965 for a qualified nonprofit corporation
2-9 for a period of not less than 10 years; or
2-10 (C) is a charitable organization qualified under
2-11 Section 509(a)(2), Internal Revenue Code of 1986, as amended, that
2-12 provides services to a qualified nonprofit corporation.
2-13 (5) "Qualified nonprofit corporation" means a
2-14 nonprofit corporation:
2-15 (A) that issued bonds on or after January 1,
2-16 1990, and before January 1, 2001, that qualified as qualified
2-17 student loan bonds under Section 144(b), Internal Revenue Code of
2-18 1986, as amended; or
2-19 (B) that the Bond Review Board has determined
2-20 meets a need for federally guaranteed student loan financing that
2-21 existing qualified nonprofit corporations cannot meet, as
2-22 determined by the Bond Review Board following a hearing based on
2-23 the following factors:
2-24 (i) the geographic coverage of existing
2-25 qualified nonprofit corporations;
2-26 (ii) the willingness of existing qualified
2-27 nonprofit corporations to serve the eligible lenders proposed to be
3-1 served; and
3-2 (iii) the ability of existing qualified
3-3 nonprofit corporations to serve the eligible lenders proposed to be
3-4 served.
3-5 (b) An authority that is a qualified nonprofit corporation
3-6 may, upon approval of the city or cities which created the same,
3-7 issue revenue bonds or otherwise borrow money to obtain funds to
3-8 purchase or to make education loans that [student or parent loan
3-9 notes which] are guaranteed under the provisions of the Higher
3-10 Education Act of 1965 [(Public Law 89-329)]. Revenue bonds issued
3-11 for such purpose shall be issued in accordance with and with the
3-12 effect provided in this chapter, except Section 53.36 shall not
3-13 apply, as this [said] chapter has been modified by Chapter 1204,
3-14 Government Code, and Subchapters A and D, Chapter 1207, Government
3-15 Code [3, Acts of the 61st Legislature, Regular Session, 1969, as
3-16 amended (Article 717k-2, Vernon's Texas Civil Statutes), and by
3-17 Chapter 784, Acts of the 61st Legislature, Regular Session, 1969
3-18 (Article 717k-3, Vernon's Texas Civil Statutes)]. Such bonds shall
3-19 be payable from and secured by a pledge of revenues derived from or
3-20 by reason of the ownership of education loans [student or parent
3-21 loan notes] and investment income after deduction of such expenses
3-22 of [or] operating the loan program as may be specified by the bond
3-23 resolution or trust indenture.
3-24 (c) [(b)] An authority [that is not an eligible lender under
3-25 the Higher Education Act of 1965, acting through a bank with trust
3-26 powers,] may cause money to be expended to make or purchase for its
3-27 account education loans [student or parent loan notes] that are
4-1 guaranteed by the Texas Guaranteed Student Loan Corporation or that
4-2 are executed by or on behalf of students who (1) are residents of
4-3 this state or (2) [who] have been admitted to attend an accredited
4-4 institution within this state. [An accredited institution shall
4-5 mean an institution which has either been recognized by a
4-6 recognized accrediting agency, as defined by Section 61.003(12) of
4-7 the Texas Education Code, or accredited by the Association of
4-8 Independent Colleges and Schools, the National Association of Trade
4-9 and Technical Schools, or the National Accrediting Commission of
4-10 Cosmetology Arts and Sciences.]
4-11 (d) An education loan made under this section that is not
4-12 made under the Higher Education Act of 1965 may be made only by a
4-13 qualified education loan lender and may not be in an amount in
4-14 excess of the difference between the cost of attendance and the
4-15 amount of other student assistance to the student, other than
4-16 loans under Section 428B(a)(1), Higher Education Act of 1965 (20
4-17 U.S.C. Section 1078-2) (relating to parent loans), for which the
4-18 student borrower may be eligible. An education loan covered by
4-19 this subsection is subject to Chapter 342, Finance Code, as
4-20 applicable, except that:
4-21 (1) the maximum interest rate on the loan may not
4-22 exceed the rate permitted under Subchapter A, Chapter 303, Finance
4-23 Code; and
4-24 (2) application and originating fees may be agreed to
4-25 by the parties and assessed at the inception of the loan, provided
4-26 that if any such fees constitute additional interest under
4-27 applicable law, the effective rate of interest agreed to over the
5-1 stated term of the loan may not exceed the rate allowed by
5-2 Subchapter A, Chapter 303, Finance Code, and accrued unpaid
5-3 interest may be added to unpaid principal at the beginning of the
5-4 agreed repayment period at the borrower's option and in accordance
5-5 with the terms of the agreement for purposes of determining the
5-6 total principal amount due at the inception of the repayment
5-7 period.
5-8 (e) [(c)] The authority shall contract with a nonprofit
5-9 corporation, organized under the laws of this state, whereby such
5-10 corporation will provide the reports and other information required
5-11 for continued participation in the federally guaranteed loan
5-12 program provided by the Higher Education Act of 1965 [(Public Law
5-13 89-329)]. [The custody of student or parent loan notes, purchased
5-14 by the bank on behalf of the authority, shall remain under the
5-15 control of a bank with trust powers.]
5-16 (f) [(d)] The authority, as a municipal corporation of the
5-17 state, is charged with a portion of the responsibility of the state
5-18 to provide educational opportunities in keeping with all applicable
5-19 state and federal laws. Nothing in this section shall be construed
5-20 as a prohibition against establishing policies to limit the
5-21 purchase of education loans to education loans [notes to notes]
5-22 executed by students attending school in a certain geographical
5-23 area or by students who are residents of the area.
5-24 (g) [(e)] In addition to establishing an authority under the
5-25 provisions of this chapter, the governing body of a city or cities
5-26 may request a qualified nonprofit corporation [organized] to
5-27 exercise the powers enumerated and provided in this section for and
6-1 on its behalf. If the qualified nonprofit corporation agrees to
6-2 exercise such powers, the directors of such corporation shall
6-3 thereafter be appointed by and be subject to removal by the
6-4 governing body of the city or cities, and except as provided in
6-5 this section, Sections 53.14, 53.15, 53.31, 53.32, 53.38, and
6-6 53.41 through 53.43 [of the Texas Education Code shall] apply to
6-7 and govern such corporation, its procedures, and bonds.
6-8 Notwithstanding the provisions of Section 53.42, a qualified
6-9 nonprofit corporation which has been requested to exercise the
6-10 powers enumerated and requested in this section may invest or cause
6-11 a trustee or custodian on behalf of such qualified nonprofit
6-12 corporation[,] to invest its funds, including the proceeds of any
6-13 bonds, notes, or other obligations issued by such qualified
6-14 nonprofit corporation and any monies which are pledged to the
6-15 payment thereof, in:
6-16 (1) certificates of deposit or other time or demand
6-17 accounts of banks and savings and loan associations which are
6-18 insured by the Federal Deposit Insurance Corporation [or the
6-19 Federal Savings and Loan Insurance Corporation], provided the
6-20 amount of any certificate of deposit in excess of that covered by
6-21 such insurance must be secured by a first and prior pledge of
6-22 government obligations having a market value of not less than 100
6-23 percent of the excess unless a nationally recognized rating agency
6-24 has given the senior securities of the bank issuing the certificate
6-25 of deposit the highest or next to the highest investment rating
6-26 available;
6-27 (2) repurchase agreements;
7-1 (3) education loans [investment securities, as defined
7-2 by Chapter 726, Acts of the 67th Legislature, Regular Session, 1981
7-3 (Article 2529b-1, Vernon's Texas Civil Statutes);]
7-4 [(4) a collective investment fund that is created as
7-5 provided by Regulation 9 of the Office of the Comptroller of the
7-6 Currency and that is invested in one or more types of investment
7-7 securities or repurchase agreements;]
7-8 [(5) an investment authorized by Subchapter A, Chapter
7-9 2256, Government Code]; or
7-10 (4) [(6)] a security issued by another nonprofit
7-11 corporation acting under this section.
7-12 (h) [(f)] A nonprofit corporation, whether acting at the
7-13 request of a city or cities under Subsection (g) or acting as an
7-14 education loan servicer or administrator for another corporation
7-15 that makes education loans under this section, [(e)] or that on its
7-16 own behalf[, that] issues securities or otherwise obtains [to
7-17 obtain] funds to purchase or make education [student or parent]
7-18 loans, may:
7-19 (1) exercise the powers granted by the Texas
7-20 Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
7-21 Texas Civil Statutes);
7-22 (2) service loans purchased or made from its funds or
7-23 contract with another person to service the loans;
7-24 (3) grant a security interest in a trust estate
7-25 securing its securities;
7-26 [(4) purchase or make a student or parent loan that is
7-27 guaranteed or insured, in whole or part, by one or more persons
8-1 engaged in guaranteeing or insuring student or parent loans,
8-2 including any agency of the federal government;] and
8-3 (4) [(5)] make investments as authorized by Subsection
8-4 (g) [(e)].
8-5 (i) [(g)] A security interest in a trust estate granted
8-6 under Subsection (h)(3) [(f)(3)] is attached and perfected at the
8-7 time the security interest is executed and delivered by the
8-8 nonprofit corporation. The security interest grants to the secured
8-9 party a first prior perfected security interest in the trust estate
8-10 for the benefit of the secured party without regard to the location
8-11 of the assets that constitute the trust estate.
8-12 (j) An authority or nonprofit corporation making education
8-13 loans under this section is exempt from the licensing requirements
8-14 of Chapter 342, Finance Code.
8-15 SECTION 2. This Act takes effect immediately if it receives
8-16 a vote of two-thirds of all the members elected to each house, as
8-17 provided by Section 39, Article III, Texas Constitution. If this
8-18 Act does not receive the vote necessary for immediate effect, this
8-19 Act takes effect September 1, 2001.