CHAPTER 53B. HIGHER EDUCATION LOAN AUTHORITIES

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EDUCATION CODE

TITLE 3. HIGHER EDUCATION

SUBTITLE A. HIGHER EDUCATION IN GENERAL

CHAPTER 53B. HIGHER EDUCATION LOAN AUTHORITIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 53B.01. SHORT TITLE. This chapter may be cited as the

Higher Education Loan Authority Act.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.02. DEFINITIONS. In this chapter:

(1) "Accredited institution" means an institution that has

either been recognized by a recognized accrediting agency, as

defined by Section 61.003, or accredited by the Accrediting

Commission for Independent Colleges and Schools, the Accrediting

Commission for Career Schools and Colleges of Technology, or the

National Accrediting Commission of Cosmetology Arts and Sciences.

(2) "Alternative education loan" means a loan other than a

guaranteed student loan that is made to or for the benefit of a

student for the purpose of financing all or part of the student's

cost of attendance at an accredited institution.

(3) "Authority" means a higher education loan authority created

under this chapter.

(4) "Board" means the board of directors of an authority.

(5) "Bond resolution" means the resolution authorizing the

issuance of revenue bonds.

(6) "City" means an incorporated city or town in this state.

(7) "Cost of attendance" means all costs of a student incurred

in connection with a program of study at an accredited

institution, as determined by the institution, including tuition

and instructional fees, the cost of room and board, books,

computers, and supplies, and other related fees, charges, and

expenses.

(8) "Governing body" means the council, commission, or other

governing body of a city.

(9) "Guaranteed student loan" means a loan made by an eligible

lender under the Higher Education Act of 1965 (Pub. L. No.

89-329), as amended.

(10) "Qualified alternative education loan lender" means a

nonprofit corporation incorporated under the laws of this state

that:

(A) is a qualified nonprofit corporation;

(B) has serviced education loans made under the Higher Education

Act of 1965, as amended, for a qualified nonprofit corporation

for a period of not less than 10 years; or

509(a)(2), Internal Revenue Code of 1986, as amended, that

provides services to a qualified nonprofit corporation.

(11) "Qualified nonprofit corporation" means a nonprofit

corporation:

(A) that issued bonds on or after January 1, 1990, and before

January 1, 2001, that qualified as qualified student loan bonds

under Section 144(b), Internal Revenue Code of 1986, as amended;

(B) that the office of the governor, in consultation with the

state student loan guaranty agency or any other public or private

entity the office of the governor considers appropriate, has

determined meets a need for student loan financing that existing

qualified nonprofit corporations cannot meet, which determination

may include information provided by the nonprofit corporation's

plan for doing business that should include documented

limitations in:

(i) the geographic coverage of existing qualified nonprofit

corporations in the nonprofit corporation's proposed area of

service;

(ii) the willingness of existing qualified nonprofit

corporations to serve the eligible lenders in the proposed area

of service; and

(iii) the ability of existing qualified nonprofit corporations

to serve the eligible lenders in the proposed area of service.

(12) "Repurchase agreement" means a simultaneous agreement

between a higher education loan authority and another entity in

which one of the parties has agreed to purchase investment

securities on a specified date and the other party has agreed to

repurchase the investment securities at the same price plus

accrued interest on a later date, in which the market value of

the investment securities purchased is in excess of the amount of

the repurchase agreement, and in which the investment securities

are so purchased and held separately from all other investment

securities, in trust, in order to complete the contractual

commitment.

(13) "Trust indenture" means the mortgage, deed of trust, or

other instrument pledging revenue or property, or creating a

mortgage lien on property, or both, to secure the revenue bonds

issued by the authority.

(14) "Trustee" means the trustee under the trust indenture.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

SUBCHAPTER B. ADMINISTRATIVE PROVISIONS

Sec. 53B.11. CREATION OF AUTHORITY. When the governing body of

a city finds that it is to the best interest of the city and its

inhabitants to create a higher education loan authority, it shall

pass an ordinance creating the authority and designating the name

by which it shall be known. If the governing bodies of two or

more cities find that it is to the best interest of the cities to

create an authority to include those cities, each governing body

shall pass an ordinance creating the authority and designating

the name by which it shall be known.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.12. TERRITORY. The authority comprises only the

territory included within the boundaries of the city or cities

creating it.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.13. CORPORATE POWERS. An authority is a body politic

and corporate having the power of perpetual succession. It shall

have a seal; it may sue and be sued; and it may make, amend, and

repeal its bylaws.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.131. AUTHORITY'S EARNINGS. A private person may not

share in any of an authority's earnings.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.14. BOARD OF DIRECTORS. (a) The authority shall be

governed by a board of directors consisting of not less than 7

nor more than 11 members to be determined at the time of creating

the authority. The directors shall be appointed by the governing

body of the city or by the governing bodies of the cities, and

they shall serve until their successors are appointed as provided

by this section. If the authority includes more than one city,

each governing body shall appoint an equal number of directors

unless otherwise agreed by the cities.

(b) The members of the board serve for two-year terms.

appointment as a director. Directors are not entitled to

compensation for services but are entitled to reimbursement for

expenses incurred in performing such service.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.15. ORGANIZATION OF BOARD; QUORUM; EMPLOYEES; COUNSEL.

(a) The board shall elect from among its members a president and

vice president, and shall elect a secretary and a treasurer who

may or may not be directors, and may elect other officers as

authorized by the authority's bylaws. The offices of secretary

and treasurer may be combined.

(b) The president has the same right to vote on all matters as

other members of the board.

present action may be taken by a majority vote of directors

present.

(d) The board may employ employees, experts, and agents as it

sees fit. It may delegate to the manager the power to employ and

discharge employees.

(e) The board may employ legal counsel.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

SUBCHAPTER C. POWERS AND DUTIES

Sec. 53B.31. NO TAXING POWER. An authority has no power to tax.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.32. NO POWER OF EMINENT DOMAIN. The authority does not

have the power of eminent domain.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.35. ISSUANCE OF BONDS; PROCEDURE; ETC. The bonds shall

be authorized by resolution adopted by a majority vote of a

quorum of the board. Bonds authorized under this section shall

be issued in accordance with Chapter 1201, Government Code. The

bonds shall mature serially or otherwise in not to exceed 50

years. The rate of interest to be borne by the bonds shall not

exceed the maximum rate prescribed by Chapter 1204, Government

Code.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.37. JUNIOR LIEN BONDS; PARITY BONDS. Bonds

constituting a junior lien on the net revenue or properties may

be issued unless prohibited by the bond resolution or trust

indenture. Parity bonds may be issued under conditions specified

in the bond resolution or trust indenture.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.38. RESERVES FOR OPERATING AND OTHER EXPENSES. Money

for the payment of not more than two years' interest on the bonds

and an amount estimated by the board to be required for operating

expenses during the first year of operation may be set aside for

those purposes out of the proceeds from the sale of the bonds.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.39. REFUNDING BONDS. Bonds may be issued for the

purpose of refunding outstanding bonds in the manner provided in

this chapter for other bonds, and may be exchanged by the

comptroller or sold and the proceeds applied in accordance with

the procedure prescribed by Subchapter B or C, Chapter 1207,

Government Code.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.40. APPROVAL OF BONDS; REGISTRATION; NEGOTIABILITY.

Bonds issued under this chapter and the record relating to their

issuance shall be submitted to the attorney general, and if he

finds that they have been issued in accordance with this chapter

and constitute valid and binding obligations of the authority and

are secured as recited therein he shall approve them, and they

shall be registered by comptroller of public accounts who shall

certify the registration thereon. Thereafter, they are

incontestable. The bonds shall be negotiable and shall contain

the following provision: "The holder hereof shall never have the

right to demand payment thereof out of money raised or to be

raised by taxation."

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.41. AUTHORIZED INVESTMENTS. All bonds issued under

this chapter are legal and authorized investments for all banks,

savings banks, trust companies, building and loan associations,

savings and loan associations, and insurance companies of all

kinds and types, and for the interest and sinking funds and other

public funds of any issuer. The bonds are also eligible and

lawful security for all deposits of public funds of the State of

Texas and of any issuer, to the extent of the value of the bonds,

when accompanied by any unmatured interest coupons appurtenant to

them.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.42. INVESTMENT OF FUNDS; SECURITY. To the extent it is

applicable, the law as to the security for and the investment of

funds, applicable to cities, controls the investment of funds

belonging to authority. The bond resolution or the indenture or

both may further restrict the making of investments. The

authority may invest the proceeds of its bonds, until the money

is needed, in the direct obligations of or obligations

unconditionally guaranteed by the United States, to the extent

authorized in the bond resolution or indenture or in both.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.43. DEPOSITORIES. The authority may select a

depository or depositories according to the procedures provided

by law for the selection of city depositories, or it may award

its depository contract to the same depository or depositories

selected by the city or cities and on the same terms.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.45. TRANSACTIONS WITH OTHER AGENCIES AND PERSONS. The

authority may borrow money and accept grants from, and enter into

contracts, leases, or other transactions with the United States,

the State of Texas, any municipal corporation in the state, and

any public or private person or corporation resident or

authorized to do business in the state.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

Sec. 53B.47. GUARANTEED STUDENT LOANS AND ALTERNATE EDUCATION

LOANS; BONDS FOR THE PURCHASE OF EDUCATION LOAN NOTES. (a) An

authority may, upon approval of the city or cities which created

the same, issue revenue bonds or otherwise borrow money to obtain

funds to purchase or to make guaranteed student loans. Revenue

bonds issued for such purpose shall be issued in accordance with

and with the effect provided in this chapter. Such bonds shall

be payable from and secured by a pledge of revenues derived from

or by reason of the ownership of guaranteed student loans and

investment income after deduction of such expenses of operating

the loan program as may be specified by the bond resolution or

trust indenture.

(b) An authority may cause money to be expended to make or

purchase for its account guaranteed student loans that are

guaranteed by the Texas Guaranteed Student Loan Corporation or

that are executed by or on behalf of students who:

(1) are residents of this state; or

(2) have been admitted to attend an accredited institution

within this state.

organized under the laws of this state, whereby such corporation

will provide the reports and other information required for

continued participation in the federally guaranteed loan program

provided by the Higher Education Act of 1965, as amended.

(d) The authority, as a municipal corporation of the state, is

charged with a portion of the responsibility of the state to

provide educational opportunities in keeping with all applicable

state and federal laws. Nothing in this section shall be

construed as a prohibition against establishing policies to limit

the purchase of guaranteed student loans to guaranteed student

loans executed by students attending school in a certain

geographical area or by students who are residents of the area.

(e) In addition to establishing an authority under the

provisions of this chapter, the governing body of a city or

cities may request a qualified nonprofit corporation to exercise

the powers enumerated and provided in this section for and on its

behalf. If the qualified nonprofit corporation agrees to

exercise such powers, the directors of such corporation shall

thereafter be appointed by and be subject to removal by the

governing body of the city or cities, and except as provided in

this section, Sections 53B.14, 53B.15, 53B.31, 53B.32, 53B.38,

and 53B.41 through 53B.43 apply to and govern such corporation,

its procedures, and bonds. Notwithstanding the provisions of

Section 53B.42, a qualified nonprofit corporation which has been

requested to exercise the powers enumerated and requested in this

section may invest or cause a trustee or custodian on behalf of

such qualified nonprofit corporation to invest its funds,

including the proceeds of any bonds, notes, or other obligations

issued by such qualified nonprofit corporation and any monies

which are pledged to the payment thereof, in:

(1) certificates of deposit or other time or demand accounts of

banks and savings and loan associations which are insured by the

Federal Deposit Insurance Corporation, provided the amount of any

certificate of deposit in excess of that covered by such

insurance must be secured by a first and prior pledge of

government obligations having a market value of not less than 100

percent of the excess unless a nationally recognized rating

agency has given the senior securities of the bank issuing the

certificate of deposit the highest or next to the highest

investment rating available;

(2) repurchase agreements;

(3) guaranteed student loans and alternative education loans; or

(4) a security issued by another nonprofit corporation acting

under this section.

(f) A nonprofit corporation, whether acting at the request of a

city or cities under Subsection (e) or acting as a servicer or

administrator for another corporation that purchases guaranteed

student loans, or that on its own behalf issues securities or

otherwise obtains funds to purchase or make guaranteed student

loans or alternative education loans, may:

(1) exercise the powers granted by the Texas Non-Profit

Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil

Statutes);

(2) service loans purchased or made from its funds or contract

with another person to service the loans;

(3) grant a security interest in a trust estate securing its

securities; and

(4) make investments as authorized by Subsection (e).

(g) A security interest in a trust estate granted under

Subsection (f)(3) is attached and perfected at the time the

security interest is executed and delivered by the nonprofit

corporation. The security interest grants to the secured party a

first prior perfected security interest in the trust estate for

the benefit of the secured party without regard to the location

of the assets that constitute the trust estate.

(h) An alternative education loan may be made under this section

only by a qualified alternative education loan lender. An

alternative education loan may not be in an amount in excess of

the difference between the cost of attendance and the amount of

other student assistance to the student, other than loans under

Section 428B(a)(1), Higher Education Act of 1965 (20 U.S.C.

Section 1078-2) (relating to parent loans), for which the student

borrower may be eligible. An alternative education loan covered

by this subsection is subject to Chapter 342, Finance Code, as

applicable, except that:

(1) the maximum interest rate on the loan may not exceed the

rate permitted under Subchapter A, Chapter 303, Finance Code; and

(2) application and origination fees may be agreed to by the

parties and assessed at the inception of the loan, provided that

if any such fees constitute additional interest under applicable

law, the effective rate of interest agreed to over the stated

term of the loan may not exceed the rate allowed by Subchapter A,

Chapter 303, Finance Code, and accrued unpaid interest may be

added to unpaid principal at the beginning of the agreed

repayment period at the borrower's option and in accordance with

the terms of the agreement for purposes of determining the total

principal amount due at the inception of the repayment period.

(i) An authority or nonprofit corporation making education loans

under this section is exempt from the licensing requirements of

Chapter 342, Finance Code.

Added by Acts 2005, 79th Leg., Ch.

641, Sec. 2, eff. September 1, 2005.

State Codes and Statutes

State Codes and Statutes

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State Codes and Statutes

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