HBA-JLV H.B. 1938 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1938 By: Solis, Jim Higher Education 3/5/2001 Introduced BACKGROUND AND PURPOSE Higher Education Servicing Corporations service student loans of the six higher education authorities in various parts of the state. These authorities are nonprofit corporations and were established to provide student loan access in the state of Texas. The authorities provide liquidity to financial institutions that make student loans by purchasing their guaranteed student loans, and funding their programs primarily through the sale of tax-exempt bonds. In an effort to make sure that student borrowers are protected against unreasonable fees, proponents seek to designate reliable sources of long-term education loans so that Texas students can afford to attend the college or university of their choice. House Bill 1938 limits the authority for making education loans to Texas nonprofit corporations that have already established a record of servicing loans under the Texas Higher Education Authority Act. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS House Bill 1938 amends the Education Code to prohibit an education loan that is not made under the Higher Education Act of 1965 from being 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 Federal PLUS loans for which a student borrower may be eligible. The bill provides that an education loan is subject to provisions governing consumer loans, except that it is prohibited for the maximum interest rate on the loan to exceed the interest rate ceiling. The bill also provides that the interest rate on the loan may be computed by spreading all interest contracted for, charged, or received during the stated term of the loan. To be eligible to exercise bonding or borrowing powers on behalf of a city or cities, the bill requires a nonprofit corporation to have issued bonds before January 1, 2001 that qualified as qualified student loan bonds under the Internal Revenue Code of 1986. The bill authorizes a nonprofit corporation, whether acting at the request of a city or cities, acting as an education loan servicer or administrator for another corporation that makes education loans, or that on its own behalf issues securities or otherwise obtains funds to purchase or make education loans, to make or purchase education loans and issue securities or notes to obtain funds for that purpose. The bill provides that an authority or nonprofit corporation making education loans is exempt from licensing requirements under provisions governing consumer loans. The bill removes provisions relating to the custody of student or parent loan notes. EFFECTIVE DATE On passage, or if the Act does not receive the necessary vote, the Act takes effect September 1, 2001.