CHAPTER 53B. HIGHER EDUCATION LOAN AUTHORITIES
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
(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, 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.
(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, 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.
(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, 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.
(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, Sec. 2, eff. September 1, 2005.