By Solis                                              H.B. No. 1938
         77R4294 JSA-F                           
                                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
 2-1     purpose of financing all or part of the student's cost of
 2-2     attendance at an accredited institution.
 2-3           (b)  An authority may, upon approval of the city or cities
 2-4     which created the same, issue revenue bonds or otherwise borrow
 2-5     money to obtain funds to purchase or to make education loans that
 2-6     [student or parent loan notes which] are guaranteed under the
 2-7     provisions of the Higher Education Act of 1965 [(Public Law
 2-8     89-329)].  Revenue bonds issued for such purpose shall be issued in
 2-9     accordance with and with the effect provided in this chapter,
2-10     except Section 53.36 shall not apply, as this [said] chapter has
2-11     been modified by Chapter 1204, Government Code, and Subchapters A
2-12     and D, Chapter 1207, Government Code [3, Acts of the 61st
2-13     Legislature, Regular Session, 1969, as amended (Article 717k-2,
2-14     Vernon's Texas Civil Statutes), and by Chapter 784, Acts of the
2-15     61st Legislature, Regular Session, 1969 (Article 717k-3, Vernon's
2-16     Texas Civil Statutes)].  Such bonds shall be payable from and
2-17     secured by a pledge of revenues derived from or by reason of the
2-18     ownership of education loans [student or parent loan notes] and
2-19     investment income after deduction of such expenses of [or]
2-20     operating the loan program as may be specified by the bond
2-21     resolution or trust indenture.
2-22           (c) [(b)]  An authority [that is not an eligible lender under
2-23     the Higher Education Act of 1965, acting through a bank with trust
2-24     powers,] may cause money to be expended to make or purchase for its
2-25     account education loans [student or parent loan notes] that are
2-26     guaranteed by the Texas Guaranteed Student Loan Corporation or that
2-27     are executed by or on behalf of students who (1) are residents of
 3-1     this state or (2) [who] have been admitted to attend an accredited
 3-2     institution within this state.  [An accredited institution shall
 3-3     mean an institution which has either been recognized by a
 3-4     recognized accrediting agency, as defined by Section 61.003(12) of
 3-5     the Texas Education Code, or accredited by the Association of
 3-6     Independent Colleges and Schools, the National Association of Trade
 3-7     and Technical Schools, or the National Accrediting Commission of
 3-8     Cosmetology Arts and Sciences.]
 3-9           (d)  An education loan made under this section that is not
3-10     made under the Higher Education Act of 1965 may not be in an amount
3-11     in excess of the difference between the cost of attendance and the
3-12     amount of other student assistance to the student,  other than
3-13     loans under Section 428B(a)(1), Higher Education Act of 1965 (20
3-14     U.S.C. Section 1078-2) (relating to parent loans), for which the
3-15     student borrower may be eligible.  An education loan covered by
3-16     this subsection is subject to Chapter 342, Finance Code, as
3-17     applicable, except that:
3-18                 (1)  the maximum interest rate on the loan may not
3-19     exceed the rate permitted under Chapter 303, Finance Code; and
3-20                 (2)  the interest rate on the loan may be computed by
3-21     spreading all interest contracted for, charged, or received during
3-22     the stated term of the loan as provided by Section 306.004, Finance
3-23     Code.
3-24           (e) [(c)]  The authority shall contract with a nonprofit
3-25     corporation, organized under the laws of this state, whereby such
3-26     corporation will provide the reports and other information required
3-27     for continued participation in the federally guaranteed loan
 4-1     program provided by the Higher Education Act of 1965 [(Public Law
 4-2     89-329)].  [The custody of student or parent loan notes, purchased
 4-3     by the bank on behalf of the authority, shall remain under the
 4-4     control of a bank with trust powers.]
 4-5           (f) [(d)]  The authority, as a municipal corporation of the
 4-6     state, is charged with a portion of the responsibility of the state
 4-7     to provide educational opportunities in keeping with all applicable
 4-8     state and federal laws.  Nothing in this section shall be construed
 4-9     as a prohibition against establishing policies to limit the
4-10     purchase of education loans to education loans [notes to notes]
4-11     executed by students attending school in a certain geographical
4-12     area or by students who are residents of the area.
4-13           (g) [(e)]  In addition to establishing an authority under the
4-14     provisions of this chapter, the governing body of a city or cities
4-15     may request a nonprofit corporation [organized] to exercise the
4-16     powers enumerated and provided in this section for and on its
4-17     behalf.  To be eligible to exercise those powers on behalf of a
4-18     city or cities, a nonprofit corporation must have issued bonds
4-19     before January 1, 2001, that qualified as qualified student loan
4-20     bonds under Section 144(b), Internal Revenue Code of 1986.  If the
4-21     corporation agrees to exercise such powers, the directors of such
4-22     corporation shall thereafter be appointed by and be subject to
4-23     removal by the governing body of the city or cities, and except as
4-24     provided in this section, Sections 53.14, 53.15,  53.31, 53.32,
4-25     53.38, and 53.41 through 53.43 [of the Texas Education Code shall]
4-26     apply to and govern such corporation, its procedures, and bonds.
4-27     Notwithstanding the provisions of Section 53.42, a nonprofit
 5-1     corporation which has been requested to exercise the powers
 5-2     enumerated and requested in this section may invest or cause a
 5-3     trustee or custodian on behalf of such nonprofit corporation[,] to
 5-4     invest its funds, including the proceeds of any bonds, notes, or
 5-5     other obligations issued by such nonprofit corporation and any
 5-6     monies which are pledged to the payment thereof, in:
 5-7                 (1)  certificates of deposit or other time or demand
 5-8     accounts of banks and savings and loan associations which are
 5-9     insured by the Federal Deposit Insurance Corporation [or the
5-10     Federal Savings and Loan Insurance Corporation], provided the
5-11     amount of any certificate of deposit in excess of that covered by
5-12     such insurance must be secured by a first and prior pledge of
5-13     government obligations having a market value of not less than 100
5-14     percent of the excess unless a nationally recognized rating agency
5-15     has given the senior securities of the bank issuing the certificate
5-16     of deposit the highest or next to the highest investment rating
5-17     available;
5-18                 (2)  repurchase agreements;
5-19                 (3)  education loans [investment securities, as defined
5-20     by Chapter 726, Acts of the 67th Legislature, Regular Session, 1981
5-21     (Article 2529b-1, Vernon's Texas Civil Statutes);]
5-22                 [(4)  a collective investment fund that is created as
5-23     provided by Regulation 9 of the Office of the Comptroller of the
5-24     Currency and that is invested in one or more types of investment
5-25     securities or repurchase agreements;]
5-26                 [(5)  an investment authorized by Subchapter A, Chapter
5-27     2256, Government Code]; or
 6-1                 (4) [(6)]  a security issued by another nonprofit
 6-2     corporation acting under this section.
 6-3           (h) [(f)]  A nonprofit corporation, whether acting at the
 6-4     request of a city or cities under Subsection (g) or acting as an
 6-5     education loan servicer or administrator for another corporation
 6-6     that makes education loans under this section, [(e)] or that on its
 6-7     own behalf[, that] issues securities or otherwise obtains [to
 6-8     obtain] funds to purchase or make education [student or parent]
 6-9     loans, may:
6-10                 (1)  exercise the powers granted by the Texas
6-11     Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
6-12     Texas Civil Statutes);
6-13                 (2)  make or purchase education loans and issue
6-14     securities or notes to obtain funds for that purpose;
6-15                 (3)  service loans purchased or made from its funds or
6-16     contract with another person to service the loans;
6-17                 (4) [(3)]  grant a security interest in a trust estate
6-18     securing its securities;
6-19                 [(4)  purchase or make a student or parent loan that is
6-20     guaranteed or insured, in whole or part, by one or more persons
6-21     engaged in guaranteeing or insuring student or parent loans,
6-22     including any agency of the federal government;]  and
6-23                 (5)  make investments as authorized by Subsection (g)
6-24     [(e)].
6-25           (i) [(g)]  A security interest in a trust estate granted
6-26     under Subsection (h)(4) [(f)(3)] is attached and perfected at the
6-27     time the security interest is executed and delivered by the
 7-1     nonprofit corporation.  The security interest grants to the secured
 7-2     party a first prior perfected security interest in the trust estate
 7-3     for the benefit of the secured party without regard to the location
 7-4     of the assets that constitute the trust estate.
 7-5           (j)  An authority or nonprofit corporation making education
 7-6     loans under this section is exempt from the licensing requirements
 7-7     of Chapter 342, Finance Code.
 7-8           SECTION 2.  This Act takes effect immediately if it receives
 7-9     a vote of two-thirds of all the members elected to each house, as
7-10     provided by Section 39, Article III, Texas Constitution.  If this
7-11     Act does not receive the vote necessary for immediate effect, this
7-12     Act takes effect September 1, 2001.