1-1 By: Solis, et al. (Senate Sponsor - Bivins) H.B. No. 1938
1-2 (In the Senate - Received from the House April 19, 2001;
1-3 April 20, 2001, read first time and referred to Committee on
1-4 Education; May 4, 2001, reported adversely, with favorable
1-5 Committee Substitute by the following vote: Yeas 8, Nays 0;
1-6 May 4, 2001, sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR H.B. No. 1938 By: Bivins
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to education loans made or financed by a higher education
1-11 authority or nonprofit corporation.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Section 53.47, Education Code, is amended to read
1-14 as follows:
1-15 Sec. 53.47. GUARANTEED STUDENT LOANS AND ALTERNATE EDUCATION
1-16 LOANS; BONDS FOR THE PURCHASE OF EDUCATION LOAN NOTES. (a) In this
1-17 section:
1-18 (1) "Accredited institution" means an institution that
1-19 has either been recognized by a recognized accrediting agency, as
1-20 defined by Section 61.003, or accredited by the Accrediting
1-21 Commission for Independent Colleges and Schools, the Accrediting
1-22 Commission for Career Schools and Colleges of Technology, or the
1-23 National Accrediting Commission of Cosmetology Arts and Sciences.
1-24 (2) "Alternative education loan" means a loan other
1-25 than a guaranteed student loan that is made to or for the benefit
1-26 of a student for the purpose of financing all or part of the
1-27 student's cost of attendance at an accredited institution.
1-28 (3) "Cost of attendance" means all costs of a student
1-29 incurred in connection with a program of study at an accredited
1-30 institution, as determined by the institution, including tuition
1-31 and instructional fees, the cost of room and board, books,
1-32 computers, and supplies, and other related fees, charges, and
1-33 expenses.
1-34 (4) "Guaranteed student loan" means a loan made by an
1-35 eligible lender under the Higher Education Act of 1965 (Pub. L. No.
1-36 89-329), as amended.
1-37 (5) "Qualified alternative education loan lender"
1-38 means a nonprofit corporation incorporated under the laws of this
1-39 state that:
1-40 (A) is a qualified nonprofit corporation;
1-41 (B) has serviced education loans made under the
1-42 Higher Education Act of 1965, as amended, for a qualified nonprofit
1-43 corporation for a period of not less than 10 years; or
1-44 (C) is a charitable organization qualified under
1-45 Section 509(a)(2), Internal Revenue Code of 1986, as amended, that
1-46 provides services to a qualified nonprofit corporation.
1-47 (6) "Qualified nonprofit corporation" means a
1-48 nonprofit corporation:
1-49 (A) that issued bonds on or after January 1,
1-50 1990, and before January 1, 2001, that qualified as qualified
1-51 student loan bonds under Section 144(b), Internal Revenue Code of
1-52 1986, as amended; or
1-53 (B) that the office of the governor, in
1-54 consultation with the state student loan guaranty agency or any
1-55 other public or private entity the office of the governor considers
1-56 appropriate, has determined meets a need for student loan financing
1-57 that existing qualified nonprofit corporations cannot meet, which
1-58 determination may include information provided by the nonprofit
1-59 corporation's plan for doing business that should include
1-60 documented limitations in:
1-61 (i) the geographic coverage of existing
1-62 qualified nonprofit corporations in the nonprofit corporation's
1-63 proposed area of service;
1-64 (ii) the willingness of existing qualified
2-1 nonprofit corporations to serve the eligible lenders in the
2-2 proposed area of service; and
2-3 (iii) the ability of existing qualified
2-4 nonprofit corporations to serve the eligible lenders in the
2-5 proposed area of service.
2-6 (b) An authority may, upon approval of the city or cities
2-7 which created the same, issue revenue bonds or otherwise borrow
2-8 money to obtain funds to purchase or to make guaranteed student
2-9 loans [student or parent loan notes which are guaranteed under the
2-10 provisions of the Higher Education Act of 1965 (Public Law
2-11 89-329)]. Revenue bonds issued for such purpose shall be issued in
2-12 accordance with and with the effect provided in this chapter,
2-13 except Section 53.36 shall not apply, as this [said] chapter has
2-14 been modified by Chapter 1204, Government Code, and Subchapters A
2-15 and D, Chapter 1207, Government Code [3, Acts of the 61st
2-16 Legislature, Regular Session, 1969, as amended (Article 717k-2,
2-17 Vernon's Texas Civil Statutes), and by Chapter 784, Acts of the
2-18 61st Legislature, Regular Session, 1969 (Article 717k-3, Vernon's
2-19 Texas Civil Statutes)]. Such bonds shall be payable from and
2-20 secured by a pledge of revenues derived from or by reason of the
2-21 ownership of guaranteed student loans [student or parent loan
2-22 notes] and investment income after deduction of such expenses of
2-23 [or] operating the loan program as may be specified by the bond
2-24 resolution or trust indenture.
2-25 (c) [(b)] An authority [that is not an eligible lender under
2-26 the Higher Education Act of 1965, acting through a bank with trust
2-27 powers,] may cause money to be expended to make or purchase for its
2-28 account guaranteed student loans [student or parent loan notes]
2-29 that are guaranteed by the Texas Guaranteed Student Loan
2-30 Corporation or that are executed by or on behalf of students who
2-31 (1) are residents of this state or (2) [who] have been admitted to
2-32 attend an accredited institution within this state. [An accredited
2-33 institution shall mean an institution which has either been
2-34 recognized by a recognized accrediting agency, as defined by
2-35 Section 61.003(12) of the Texas Education Code, or accredited by
2-36 the Association of Independent Colleges and Schools, the National
2-37 Association of Trade and Technical Schools, or the National
2-38 Accrediting Commission of Cosmetology Arts and Sciences.]
2-39 (d) [(c)] The authority shall contract with a nonprofit
2-40 corporation, organized under the laws of this state, whereby such
2-41 corporation will provide the reports and other information required
2-42 for continued participation in the federally guaranteed loan
2-43 program provided by the Higher Education Act of 1965, as amended
2-44 [(Public Law 89-329)]. [The custody of student or parent loan
2-45 notes, purchased by the bank on behalf of the authority, shall
2-46 remain under the control of a bank with trust powers.]
2-47 (e) [(d)] The authority, as a municipal corporation of the
2-48 state, is charged with a portion of the responsibility of the state
2-49 to provide educational opportunities in keeping with all applicable
2-50 state and federal laws. Nothing in this section shall be construed
2-51 as a prohibition against establishing policies to limit the
2-52 purchase of guaranteed student loans to guaranteed student loans
2-53 [notes to notes] executed by students attending school in a certain
2-54 geographical area or by students who are residents of the area.
2-55 (f) [(e)] In addition to establishing an authority under the
2-56 provisions of this chapter, the governing body of a city or cities
2-57 may request a qualified nonprofit corporation [organized] to
2-58 exercise the powers enumerated and provided in this section for and
2-59 on its behalf. If the qualified nonprofit corporation agrees to
2-60 exercise such powers, the directors of such corporation shall
2-61 thereafter be appointed by and be subject to removal by the
2-62 governing body of the city or cities, and except as provided in
2-63 this section, Sections 53.14, 53.15, 53.31, 53.32, 53.38, and
2-64 53.41 through 53.43 [of the Texas Education Code shall] apply to
2-65 and govern such corporation, its procedures, and bonds.
2-66 Notwithstanding the provisions of Section 53.42, a qualified
2-67 nonprofit corporation which has been requested to exercise the
2-68 powers enumerated and requested in this section may invest or cause
2-69 a trustee or custodian on behalf of such qualified nonprofit
3-1 corporation[,] to invest its funds, including the proceeds of any
3-2 bonds, notes, or other obligations issued by such qualified
3-3 nonprofit corporation and any monies which are pledged to the
3-4 payment thereof, in:
3-5 (1) certificates of deposit or other time or demand
3-6 accounts of banks and savings and loan associations which are
3-7 insured by the Federal Deposit Insurance Corporation [or the
3-8 Federal Savings and Loan Insurance Corporation], provided the
3-9 amount of any certificate of deposit in excess of that covered by
3-10 such insurance must be secured by a first and prior pledge of
3-11 government obligations having a market value of not less than 100
3-12 percent of the excess unless a nationally recognized rating agency
3-13 has given the senior securities of the bank issuing the certificate
3-14 of deposit the highest or next to the highest investment rating
3-15 available;
3-16 (2) repurchase agreements;
3-17 (3) guaranteed student loans and alternative education
3-18 loans [investment securities, as defined by Chapter 726, Acts of
3-19 the 67th Legislature, Regular Session, 1981 (Article 2529b-1,
3-20 Vernon's Texas Civil Statutes);]
3-21 [(4) a collective investment fund that is created as
3-22 provided by Regulation 9 of the Office of the Comptroller of the
3-23 Currency and that is invested in one or more types of investment
3-24 securities or repurchase agreements;]
3-25 [(5) an investment authorized by Subchapter A, Chapter
3-26 2256, Government Code]; or
3-27 (4) [(6)] a security issued by another nonprofit
3-28 corporation acting under this section.
3-29 (g) [(f)] A nonprofit corporation, whether acting at the
3-30 request of a city or cities under Subsection (f) or acting as a
3-31 servicer or administrator for another corporation that purchases
3-32 guaranteed student loans, [(e)] or that on its own behalf[, that]
3-33 issues securities or otherwise obtains [to obtain] funds to
3-34 purchase or make guaranteed student loans or alternative education
3-35 [student or parent] loans, may:
3-36 (1) exercise the powers granted by the Texas
3-37 Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
3-38 Texas Civil Statutes);
3-39 (2) service loans purchased or made from its funds or
3-40 contract with another person to service the loans;
3-41 (3) grant a security interest in a trust estate
3-42 securing its securities;
3-43 [(4) purchase or make a student or parent loan that is
3-44 guaranteed or insured, in whole or part, by one or more persons
3-45 engaged in guaranteeing or insuring student or parent loans,
3-46 including any agency of the federal government;] and
3-47 (4) [(5)] make investments as authorized by Subsection
3-48 (f) [(e)].
3-49 (h) [(g)] A security interest in a trust estate granted
3-50 under Subsection (g)(3) [(f)(3)] is attached and perfected at the
3-51 time the security interest is executed and delivered by the
3-52 nonprofit corporation. The security interest grants to the secured
3-53 party a first prior perfected security interest in the trust estate
3-54 for the benefit of the secured party without regard to the location
3-55 of the assets that constitute the trust estate.
3-56 (i) An alternative education loan may be made under this
3-57 section only by a qualified alternative education loan lender. An
3-58 alternative education loan may not be in an amount in excess of the
3-59 difference between the cost of attendance and the amount of other
3-60 student assistance to the student, other than loans under Section
3-61 428B(a)(1), Higher Education Act of 1965 (20 U.S.C. Section 1078-2)
3-62 (relating to parent loans), for which the student borrower may be
3-63 eligible. An alternative education loan covered by this subsection
3-64 is subject to Chapter 342, Finance Code, as applicable, except
3-65 that:
3-66 (1) the maximum interest rate on the loan may not
3-67 exceed the rate permitted under Subchapter A, Chapter 303, Finance
3-68 Code; and
3-69 (2) application and origination fees may be agreed to
4-1 by the parties and assessed at the inception of the loan, provided
4-2 that if any such fees constitute additional interest under
4-3 applicable law, the effective rate of interest agreed to over the
4-4 stated term of the loan may not exceed the rate allowed by
4-5 Subchapter A, Chapter 303, Finance Code, and accrued unpaid
4-6 interest may be added to unpaid principal at the beginning of the
4-7 agreed repayment period at the borrower's option and in accordance
4-8 with the terms of the agreement for purposes of determining the
4-9 total principal amount due at the inception of the repayment
4-10 period.
4-11 (j) An authority or nonprofit corporation making education
4-12 loans under this section is exempt from the licensing requirements
4-13 of Chapter 342, Finance Code.
4-14 (k) Subsection (a)(6) expires September 1, 2003. On or
4-15 after September 1, 2003, in this section, the term "qualified
4-16 nonprofit corporation" means any nonprofit corporation authorized
4-17 by a city to exercise the powers of an authority under this
4-18 section.
4-19 SECTION 2. This Act takes effect immediately if it receives
4-20 a vote of two-thirds of all the members elected to each house, as
4-21 provided by Section 39, Article III, Texas Constitution. If this
4-22 Act does not receive the vote necessary for immediate effect, this
4-23 Act takes effect September 1, 2001.
4-24 * * * * *