EDUCATION CODE CHAPTER 53B. HIGHER EDUCATION LOAN AUTHORITIES
EDUCATION CODE
CHAPTER 53B. HIGHER EDUCATION LOAN AUTHORITIES
SUBCHAPTER A. GENERAL PROVISIONS
§ 53B.01. SHORT TITLE. This chapter may be cited as the
Higher Education Loan Authority Act.
Added by Acts 2005, 79th Leg., Ch. 641, § 2, eff. September 1,
2005.
§ 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
(C) is a charitable organization qualified under
Section 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; or
(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, § 2, eff. September 1,
2005.
SUBCHAPTER B. ADMINISTRATIVE PROVISIONS
§ 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, § 2, eff. September 1,
2005.
§ 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, § 2, eff. September 1,
2005.
§ 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, § 2, eff. September 1,
2005.
§ 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, § 2, eff. September 1,
2005.
§ 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.
(c) No officer or employee of any such city is eligible for
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, § 2, eff. September 1,
2005.
§ 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.
(c) A majority constitutes a quorum, and when a quorum is
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, § 2, eff. September 1,
2005.
SUBCHAPTER C. POWERS AND DUTIES
§ 53B.31. NO TAXING POWER. An authority has no power to
tax.
Added by Acts 2005, 79th Leg., Ch. 641, § 2, eff. September 1,
2005.
§ 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, § 2, eff. September 1,
2005.
§ 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, § 2, eff. September 1,
2005.
§ 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, § 2, eff. September 1,
2005.
§ 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, § 2, eff. September 1,
2005.
§ 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, § 2, eff. September 1,
2005.
§ 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, § 2, eff. September 1,
2005.
§ 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, § 2, eff. September 1,
2005.
§ 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, § 2, eff. September 1,
2005.
§ 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, § 2, eff. September 1,
2005.
§ 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, § 2, eff. September 1,
2005.
§ 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.
(c) The authority shall contract with a nonprofit
corporation, 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, § 2, eff. September 1,
2005.