By: Bivins S.B. No. 1723
Line and page numbers may not match official copy.
Bill not drafted by TLC or Senate E&E.
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
2-1 (B) to or for the benefit of a student for the
2-2 purpose of financing all or part of the student's cost of
2-3 attendance at an accredited institution.
2-4 (4) "Qualified nonprofit corporation" means a
2-5 nonprofit corporation:
2-6 (A) that issued bonds on or after January 1,
2-7 1990, and before to January 1, 2001, that qualified as qualified
2-8 student loan bonds under Section 144(b), Internal Revenue Code of
2-9 1986, as amended; or
2-10 (B) that the Bond Review Board has determined
2-11 meets a need for student loan financing that existing qualified
2-12 nonprofit corporations cannot meet, as determined by the Bond
2-13 Review Board following a hearing based on the following factors:
2-14 (i) the geographic coverage of existing
2-15 qualified nonprofit corporations;
2-16 (ii) willingness of existing qualified
2-17 nonprofit corporations to serve the eligible lenders proposed to be
2-18 served; and
2-19 (iii) the ability of existing qualified
2-20 nonprofit corporations to serve the eligible lenders proposed to be
2-21 served.
2-22 (b) An authority may, upon approval of the city or cities
2-23 which created the same, issue revenue bonds or otherwise borrow
2-24 money to obtain funds to purchase or to make education loans that
2-25 [student or parent loan notes which] are guaranteed under the
2-26 provisions of the Higher Education Act of 1965 [(Public Law
3-1 89-329)]. Revenue bonds issued for such purpose shall be issued in
3-2 accordance with and with the effect provided in this chapter,
3-3 except Section 53.36 shall not apply, as this [said] chapter has
3-4 been modified by Chapter 1204, Government Code, and Subchapters A
3-5 and D, Chapter 1207, Government Code [3, Acts of the 61st
3-6 Legislature, Regular Session, 1969, as amended (Article 717k-2,
3-7 Vernon's Texas Civil Statutes), and by Chapter 784, Acts of the
3-8 61st Legislature, Regular Session, 1969 (Article 717k-3, Vernon's
3-9 Texas Civil Statutes)]. Such bonds shall be payable from and
3-10 secured by a pledge of revenues derived from or by reason of the
3-11 ownership of education loans [student or parent loan notes] and
3-12 investment income after deduction of such expenses of [or]
3-13 operating the loan program as may be specified by the bond
3-14 resolution or trust indenture.
3-15 (c) [(b)] An authority [that is not an eligible lender under
3-16 the Higher Education Act of 1965, acting through a bank with trust
3-17 powers,] may cause money to be expended to make or purchase for its
3-18 account education loans [student or parent loan notes] that are
3-19 guaranteed by the Texas Guaranteed Student Loan Corporation or that
3-20 are executed by or on behalf of students who (1) are residents of
3-21 this state or (2) [who] have been admitted to attend an accredited
3-22 institution within this state. [An accredited institution shall
3-23 mean an institution which has either been recognized by a
3-24 recognized accrediting agency, as defined by Section 61.003(12) of
3-25 the Texas Education Code, or accredited by the Association of
3-26 Independent Colleges and Schools, the National Association of Trade
4-1 and Technical Schools, or the National Accrediting Commission of
4-2 Cosmetology Arts and Sciences.]
4-3 (d) An education loan made under this section that is not
4-4 made under the Higher Education Act of 1965 may not be in an amount
4-5 in excess of the difference between the cost of attendance and the
4-6 amount of other student assistance to the student, other than
4-7 loans under Section 428B(a)(1), Higher Education Act of 1965 (20
4-8 U.S.C. Section 1078-2) (relating to parent loans), for which the
4-9 student borrower may be eligible. An education loan covered by
4-10 this subsection is subject to Chapter 342, Finance Code, as
4-11 applicable, except that:
4-12 (1) the maximum interest rate on the loan may not
4-13 exceed the rate permitted under Chapter 303, Finance Code; and
4-14 (2) the interest rate on the loan may be computed by
4-15 spreading all interest contracted for, charged, or received during
4-16 the stated term of the loan as provided by Section 306.004, Finance
4-17 Code.
4-18 (e) [(c)] The authority shall contract with a nonprofit
4-19 corporation, organized under the laws of this state, whereby such
4-20 corporation will provide the reports and other information required
4-21 for continued participation in the federally guaranteed loan
4-22 program provided by the Higher Education Act of 1965 [(Public Law
4-23 89-329)]. [The custody of student or parent loan notes, purchased
4-24 by the bank on behalf of the authority, shall remain under the
4-25 control of a bank with trust powers.]
4-26 (f) [(d)] The authority, as a municipal corporation of the
5-1 state, is charged with a portion of the responsibility of the state
5-2 to provide educational opportunities in keeping with all applicable
5-3 state and federal laws. Nothing in this section shall be construed
5-4 as a prohibition against establishing policies to limit the
5-5 purchase of education loans to education loans [notes to notes]
5-6 executed by students attending school in a certain geographical
5-7 area or by students who are residents of the area.
5-8 (g) [(e)] In addition to establishing an authority under the
5-9 provisions of this chapter, the governing body of a city or cities
5-10 may request a qualified nonprofit corporation [organized] to
5-11 exercise the powers enumerated and provided in this section for and
5-12 on its behalf. If the qualified nonprofit corporation agrees to
5-13 exercise such powers, the directors of such corporation shall
5-14 thereafter be appointed by and be subject to removal by the
5-15 governing body of the city or cities, and except as provided in
5-16 this section, Sections 53.14, 53.15, 53.31, 53.32, 53.38, and
5-17 53.41 through 53.43 [of the Texas Education Code shall] apply to
5-18 and govern such corporation, its procedures, and bonds.
5-19 Notwithstanding the provisions of Section 53.42, a qualified
5-20 nonprofit corporation which has been requested to exercise the
5-21 powers enumerated and requested in this section may invest or cause
5-22 a trustee or custodian on behalf of such qualified nonprofit
5-23 corporation[,] to invest its funds, including the proceeds of any
5-24 bonds, notes, or other obligations issued by such qualified
5-25 nonprofit corporation and any monies which are pledged to the
5-26 payment thereof, in:
6-1 (1) certificates of deposit or other time or demand
6-2 accounts of banks and savings and loan associations which are
6-3 insured by the Federal Deposit Insurance Corporation [or the
6-4 Federal Savings and Loan Insurance Corporation], provided the
6-5 amount of any certificate of deposit in excess of that covered by
6-6 such insurance must be secured by a first and prior pledge of
6-7 government obligations having a market value of not less than 100
6-8 percent of the excess unless a nationally recognized rating agency
6-9 has given the senior securities of the bank issuing the certificate
6-10 of deposit the highest or next to the highest investment rating
6-11 available;
6-12 (2) repurchase agreements;
6-13 (3) education loans [investment securities, as defined
6-14 by Chapter 726, Acts of the 67th Legislature, Regular Session, 1981
6-15 (Article 2529b-1, Vernon's Texas Civil Statutes);]
6-16 [(4) a collective investment fund that is created as
6-17 provided by Regulation 9 of the Office of the Comptroller of the
6-18 Currency and that is invested in one or more types of investment
6-19 securities or repurchase agreements;]
6-20 [(5) an investment authorized by Subchapter A, Chapter
6-21 2256, Government Code]; or
6-22 (4) [(6)] a security issued by another nonprofit
6-23 corporation acting under this section.
6-24 (h) [(f)] A nonprofit corporation, whether acting at the
6-25 request of a city or cities under Subsection (g) or acting as an
6-26 education loan servicer or administrator for another corporation
7-1 that makes education loans under this section, [(e)] or that on its
7-2 own behalf[, that] issues securities or otherwise obtains [to
7-3 obtain] funds to purchase or make education [student or parent]
7-4 loans, may:
7-5 (1) exercise the powers granted by the Texas
7-6 Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
7-7 Texas Civil Statutes);
7-8 (2) make or purchase education loans and issue
7-9 securities or notes to obtain funds for that purpose;
7-10 (3) service loans purchased or made from its funds or
7-11 contract with another person to service the loans;
7-12 (4) [(3)] grant a security interest in a trust estate
7-13 securing its securities;
7-14 [(4) purchase or make a student or parent loan that is
7-15 guaranteed or insured, in whole or part, by one or more persons
7-16 engaged in guaranteeing or insuring student or parent loans,
7-17 including any agency of the federal government;] and
7-18 (5) make investments as authorized by Subsection (g)
7-19 [(e)].
7-20 (i) [(g)] A security interest in a trust estate granted
7-21 under Subsection (h)(4) [(f)(3)] is attached and perfected at the
7-22 time the security interest is executed and delivered by the
7-23 nonprofit corporation. The security interest grants to the secured
7-24 party a first prior perfected security interest in the trust estate
7-25 for the benefit of the secured party without regard to the location
7-26 of the assets that constitute the trust estate.
8-1 (j) An authority or nonprofit corporation making education
8-2 loans under this section is exempt from the licensing requirements
8-3 of Chapter 342, Finance Code.
8-4 SECTION 2. This Act takes effect immediately if it receives
8-5 a vote of two-thirds of all the members elected to each house, as
8-6 provided by Section 39, Article III, Texas Constitution. If this
8-7 Act does not receive the vote necessary for immediate effect, this
8-8 Act takes effect September 1, 2001.