Texas Student Loan Collection Follies: AG Ken Paxton collects grand total of $54.12 by garnishing student loan debtor’s bank account; bank gets $600.00 for its trouble, for a total haul of $654.12

HOW THE STATE OF TEXAS SQUEEZES A FEW ROCK-BOTTOM DOLLARS 
FROM STUDENT LOAN DEBTORS 

Texas Attorney General Ken Paxton presides over a well-oiled litigation machine optimized to extract money from people who have fallen behind on payments on the state-sponsored student loans funded and administered by the Texas Higher Education Coordinating Board (THECB). 

To be sure, keeping the flow of payments coming is important to the long-time viability of the student loan system if it is to be self-sustaining (as opposed to being supported by general revenue). 

But consider this:

On February 1, 2019, the Attorney General went after one of the wayward student loan borrowers with a writ of garnishment against two banks suspected of holding funds owned by the judgment debtor:

One bank was nonsuited, presumably because the ex-student had no account there. The other one, JPMorgan Chase, reported that the customer/judgment debtor had the princely sum of $654.12 sitting in his account.

***

The Garnishee Bank wants $600 in attorney's fees 

Given the measly amount, it is reasonable to guess that the debtor is in the habit of living paycheck to paycheck, and that the sum was what’s left from the most recent pay period.

On April 2, 2019 a judgment of garnishment was duly entered for the benefit of garnishor and garnishee. The garnishee bank was awarded $600 in attorney’s fees and State recovered a net of $54.12 to be applied to the loan balance. Based on the State's application for the writ of garnishment, the amount of the underlying judgment is $45,094.00. 

Does this make sense? Even if only looking at it from a cost-benefit perspective? 

Judgment of Garnishment in THECB student loan case 

A private bank gets $600 for its rather minor trouble of having to file an answer in the garnishment action and forking over its customer’s money to a third party; the State collects $54.12 to help assure the viability of its student loan program. Meanwhile, the debtor, who had his account balance frozen, then seized, may not be able to buy food and pay bills until the next paycheck amount is direct-deposited into his checking account.

  

The student loan debtor is out $600 that did not go to reducing the outstanding debt on the judgment owed to the State, but went into the coffers of the bank that clean out his account per court order.

If you look up the case documents, the is-this-right question gets even pricklier.

Turns out the underlying judgment was signed Apr. 21, 2006. So it is more than 12 years old; it was granted for $16,232.97 plus $97.50 costs of suit with a 9% interest rate. A prior execution attempt in 2006 turned up no assets to seize.

Nulla Bona Execution Attempt in 2006 

So the Attorney General is now (in 2019) trying to collect a sum that is about three times the original judgment amount. It has been augmented greatly thanks to the much higher interest rate in 2006. In recent years the judgment interest rate has been 5%.
    

Paxton sues hundreds of former Texas college students who defaulted on THECB student loans each year at the Travis County courthouse, conveniently located a few blocks for his headquarters in Austin, Texas. Not so convenient for the ex-collegiate defendants around the state, and some beyond, but that does not really matter because they all end up with default judgments or summary judgments in any event. Even if they were to hire a private attorney to enter an appearance, it is for naught, except that it may postpone the highly predictable outcome: but only for a few months, at best. 

Writ of Execution in 2006 turned up no no-exempt assets 

   

Collecting from the Collectors: Ken Paxton's Phony Defense of Texas Consumers

HOW TO MAKE MONEY OFF THE VICTIMS OF ABUSIVE DEBT-COLLECTION

Attorney General Ken Paxton's Phony Defense 

of Texas Consumers 

On July 14, 2017 State District Judge Larry Weiman in Houston awarded the State a judgment for more than $25 million based on a verdict delivered by a Harris County jury a few weeks earlier against local attorney Joseph O. Onwuteaka and his company and law firm for code violations committed in the course of collecting consumer debt: Most notably, suing consumers in a distant venue and failing to redact sensitive personal information.

Attorney General Ken Paxton was quick to take credit. 

Not that Paxton had done the work on the enforcement case, which had been dragging on since 2013 and had already made a trip to the 14th Court of Appeals in Houston and the Texas Supreme Court, albeit on ancillary issues. Nor was it even filed under his watch. Ironically, even though the State’s petition was amended during trial, it was still stating that Samara Portfolio Management LLC and the co-defendants were being sued by Greg Abbott, now Texas Governor. 

That didn’t stop Ken Paxton from rising to the occasion. Before the final judgment and permanent injunction was even posted on the Harris County District Clerk’s website for all the world to behold, Paxton issued a press release with a hotlink to an early-bird copy of the signed judgment, gloating about having thrown the books at Joseph Onwuteaka and procured a $25 Million judgment for the State for illegal debt collection. 

Ken Paxton's $25mil press release - Original here 

Onwuteaka is a Houston-area debt collection attorney, who had gotten himself into the business of squeezing dollars form defaulting debtors after buying up charged-off accounts from creditors who had given up on collecting on those account themselves. He put those debts into the name of an LLC owned by him and his wife, and then hired his own lawfirm to collect the stale debts, with himself serving as attorney of record and attorney in charge. 

In 2013, Paxton’s predecessor in office, Greg Abbott, decided to go after Onwuteaka, the debt-purchasing outfit set up by him (Samara Portfolio Management, LLC) and Onwuteaka’s law firm, for suing debtors in a county in which they do not live and where they hadn’t signed the contract that is the basis for the debt claim, -- that county being Harris County (Houston). Abbott sued through the Consumer Protection Division and also alleged violations of the State's privacy law protecting sensitive personal information from disclosure. 

It’s a picture-perfect case of the pot calling the kettle black

Onwutaka would sue scores of people living elsewhere in the State for his own convenience in a JP Court in Downtown Houston and finally got clobbered by the Attorney General after putting up a hell of a fight. 

The irony is that Ken Paxton does the same thing that he brought Onwuteaka to justice for, as it were.

He goes after people owing money on state-sponsored student loans in Travis County courts, just a few blocks from his Downtown Austin office. Also rather convenient. He isn’t personally involved, of course, but everything is done in his name. 

Paxton presides over a well-oiled litigation machine that churns out debt collection lawsuits by the hundreds, in assembly-line fashion. Highly effective, highly efficient. But the cost-savings aren’t passed on to consumers. To the contrary. Debtors are a business opportunity to fatten up the revenue flow, just as they were for Onwuteaka.

Sitting ducks to be milked, if it may please the blawgosphere to mix metaphors.

Onwuteaka is now on the hook for millions in penalties for wrongful treatment of Texans owing debt, but for Paxton it’s legal. How so? It's perfectly okay for Paxton because he is the beneficiary of a special venue law that says that suit on all Texas Higher Education Coordinating Board loans is to be filed in Austin, no matter where the debtor or the parent who co-signed the promissory note might live or may have signed the note. 

Paxton routinely even sues them out-of-state, using the Secretary of State for long-arm service of process. A few lucking ones even get Paxton’s greetings on a debt suit citation while residing abroad. As far away as Japan.

Some missive from home.

Unlike Joe Onwuteaka, the Attorney General cannot be guilty of suing Texas consumers in a distant and inconvenient forum. For he has the blessings of the Texas Legislature. But what difference does it make to those at the receiving end of the citation whether it comes from Houston, thanks to Joseph Onwutaka, or from Austin, on orders of the Attorney General, when they don’t live in either city?

Paxton won't yield on Austin Venue 

Unlike Onwuteaka, who had to commute to Downtown Houston from Sugarland (at least before the advent of efiling) and is now facing millions of dollars in penalties for wrongful litigation conduct, the Attorney General has his own special-interest law that allows him to sue Texans across the State from the comfort of his high-rise office in Austin, with occasional hearings a few block down the street at the Travis County Courthouse. 

   

But what excuse, not to mention legislative mandate, could the Attorney General conceivably have for any and all of the following:

• • Misrepresenting the amount of the student loan debt by stating a specific dollar amount in the petition, then hitting defendants with 150% or more of that amount when filing a motion for default judgment with accompanying affidavit on damages for the higher amount. 
• • Pleading for no less than $750 or $1,000 in attorney’s fees in the petition served on the defendants, then filing a fee affidavit for twice, thrice, or even five times as much, depending on the number of notes and size of the loan. 
• • Failing to disclose in his petitions how much interest has accrued on the loans, some very old, thanks to another special law that exempts them from the statute of limitations that applies to everyone else, and failing to break down the amounts for each loan when suing on several notes. 
• • Suing student obligor and co-signer separately and getting two judgments for twice the debt amount, and twice the attorney’s fees, instead of only one judgment for the correct amount, with joint and several liability.
• • Intimidating defendants into not fighting or even answering the lawsuit and providing them with a form to waive not only service, but notice of hearing, where they can then be hit with large amounts of interest and bloated claims for attorney’s fees.  
• • Submitting boilerplate affidavits with less than a handful of variable pieces of data: Name of defendant, amount of the debt, interest, and late charges. And no account or loan payment history records ever attached to support the say-so testimony of his collection division’s designated affidavit signer. 
• • Submitting affidavits claiming thousands of dollars in reasonable and necessary attorney’s fees for mass-produced paperwork that takes bare minutes to generate off a computer based document production system, which is then quickly signed and efiled. 

The Attorney General ostensibly went after Joseph Onwuteaka and his companies to protect the public from a notorious financial predator using heavy-handed tactics to collect on high-interest loans.  

Who will protect the public from the Attorney General and his very own questionable and deceptive conduct? 

Onwuteaka enriched himself on the backs of financially weak people. The Attorney General went after him, and now makes off with Onwuteaka’s ill-gotten gains, which are destined for the State’s and the Attorney General’s own coffers. 

State's abstract of Judgment promptly filed after entry of Final Judgment against Onwuteaka et al 

What did the abused consumers get in restitution or damages while the Attorney General rewarded himself for several years of litigation culminating in a jury trial with millions of dollars while supposedly fighting the good fight for financially struggling consumers and for the good of the public? 

-- Nothing. 

Greg Abbott at least pleaded for restitution to consumers: "Disgorgement", legally speaking. Paxton delivered zilch on that plea for affected consumer-debtors. 

The untold story here is one of untempered institutional greed following in the wake of untempered private greed by an entrepreneurial but unethical and much-disciplined member of the State Bar of Texas. 

First a wayward attorney debt collector squeezes hard-earned dollars from strained family budgets with duplicitous tactics, with the help of a local assembly-line JP court letting him have his way with consumers because it’s just business as usual, then the Attorney General sweeps in from Austin, shuts down Onwuteaka’s boiler-room after parrying with him over several years, and then hoovers up the loot.  

  

KEN PAXTON: HELMSMAN OF ASSEMBLY-LINE DECEPTIONS  

On January 31, 2017, the AG filed a lawsuit against a guy named Don Ray, one of about 100 student loan collection suits filed in Travis County that month, requesting - as he does in hundreds of cases of like kind -- that “Defendant be cited to appear and answer, and that, on final hearing, Plaintiff have judgment of and from Defendant the principal sum of 5,000.00 plus interest, reasonable collection costs, and other charges which have lawfully accrued, according to the note's/notes' terms, attorney fees of not less than 1,000.00, post judgment interest, and such other and further relief to which Plaintiff may be justly entitled either at law or in equity. See Cause No. C-1-CV-17-000942 (link to docket).

According to the process server, Defendant Ray was served February 15, 2017 in Henderson County. He had co-signed the student loan note for his step-child more than twenty years earlier, in 1994, in Palestine, Texas.

Less than two months later, on April 13, 2017, the Attorney General obtained a default judgment for $14,435.99 on that note and $2,000.00 in attorney's fees.  The default judgment additionally awards interest at the rate of 9% on the $14,435.99 amount that wasn’t disclosed in the petition. (The current judgment interest rate is 5%.)

In the pleading on which the default judgment is based, the principal sum of 5,000.00 was underlined and rendered in bold font. to make it stands out from the text. See below:

Put on the defense, the Attorney General would no doubt argue that - well - the petition accurately states the principal amount of the loan was $5,000.00, which matches the amount shown on the attached promissory note with signed guaranty, and that the word "plus interest" does not rule that the accrued interest may actually be a multiple of the principal. 

Regarding the interest, the Attorney General would point out that the pleading rules do not require disclosure of the rate sought when the lawsuit papers are served. And as for attorney's fees, the petition did not need to state that $2,000.00 would be sought in the default or summary judgment because it stated "not less" than $1,000.00 and therefore left open the possibility that fees might the fees might be higher, - like double or triple. 

And he would be right. The petition was not technically false. It was just deceptive. And in a very clever and calculated way. In a way reminiscent of how Joe Onwuteaka and his ilk operate. 

A person of ordinary intelligence would have looked at the dollar figure - rendered and bold font for emphasis - and thought he was being sued for $5,000.00, rather than for $14,435.99, almost three times as much, and more than three times the amount stated in the petition, including the attorney’s fee award. 

The average co-signing parent or step-parent, now on the receiving end of a lawsuit, may have missed the dollar figure for the attorney's fees altogether because it was not shown in bold digits; but if he read the petition carefully, it would have been reasonable for him to conclude that he was being sued for $1,000.00 in attorney's fees, rather than twice that. 

And he might have thought that if was best just to let the AG have his way, rather than put up a fight. After all, he was just being sued for $6,000.00 and interest. 

Or so he would have thought. -- Wrongly. 

"The Court [...] finds that Defendant is indebted to Plaintiff for the principal sum of $ 5,000.00, interest in the amount of $9,435.99, late charges in the amount of $0.00 for a total sum of $14,435.99 plus 9.00% interest thereon per annum from the date of this judgment until paid.” 

“The Court further finds that Plaintiff is entitled to reasonable attorney's fees in the amount of $2,000.00." 

The Attorney General also has a perfect defense for having doubled up on the attorney's fees, which are grossly overstated given that the assistant attorney general assigned to the case did little more than sign a few papers generated from e-templates on his office’s computer system.

A judge has signed off on the default judgment he submitted and thereby declared the fees to be reasonable. $2,000.00 made in minutes. Profitable indeed. Case closed as of April 13, 2017, date of the judgment.

Gavel or no gavel. Res judicata.

The Travis County Clerk gives student loan suit defendants notice that a judgment was entered for the State, but a copy of the judgment is not attached to the mailing, so the recipient doesn’t even know that he is on the hook for much more than the amount he thought he was being sued for. As much as three times as much, as seen in Case No. C-1-CV-17-000942.

After thirty days, it’s too late to file a motion to set aside the default judgment.

ATTORNEY-GENERAL LITIGATION AS A REVENUE SOURCE 
AND PROFIT CENTER 

ATTORNEY FEE ENHANCEMENT
IN STUDENT LOAN COLLECTION SUITS:
PETITION AMOUNT VS. AMOUNT SOUGHT AND AWARDED IN JUDGMENT 

Debt Collector Profile: John C. Adams - Attorney in charge of Texas Attorney General Ken Paxton's Student Loan Collection Shop

JOHN C. ADAMS, Assistant Attorney General (Review)

John C. Adams is the State's student loan collector-in-chief. Not his official title, but a fitting moniker, considering what he does day-in, day-out. The loans at issue are administered by the Texas Higher Education Coordinating Board (THECB) and Adams takes them to court for collection when ex-students or their parents (or other co-signers) don't pony up.

By the thousands.

These are State of Texas loans, not federal student loans or private student loans. They are governed by statute. Chapter 52 of the Texas Education Code, to be specific. 

The most common ones are TEXAS B-ON-TIME (BT) loans and COLLEGE ACCESS LOANS (CAL) (current program description here), but there are others, including conditional grants or scholarships that are converted to repayable loans if the conditions for the grant are not met, such as when the student drops out of the program funded by the grant/loan.

A WELL-OILED MACHINE - THE ATTORNEY GENERAL'S STUDENT LAWSUIT MILL

Adams has been at it since 1999. He presides over a highly automated lawsuit production system with few employees geared up to produce default judgments (mostly) at a rapid rate with a minimum amount of effort and time expenditure. In other words, highly efficient. If a trial is needed or a hearing is requested on a case, Adams typically budgets 5 minutes for an in-court appearance. Unfortunately for Texas consumers, the cost-savings associated with the economies of scale are not passed on to them, as will be detailed below.

VENUE IN TRAVIS COUNTY

All State student loan collection suits are filed at the Travis County Courthouse, which is located within a few blocks of Adams' office at 300 W 15th St., Austin TX 78701-1649.

Documents to be filed with the court are assembled using electronic litigation forms (templates) into which a few pieces of variable data (such as name and address of Defendant, and amount of the alleged balance outstanding) are entered either manually or by using file merge functionality on office software. As a result, the documents in student loan case files are almost identical. They can be viewed by pulling up the docket sheet on the County Clerk's website, and selecting the "Document Event" option from the menu. The easiest way to access a case docket is by entering the cause number (if known) on the search screen. For research purposes, sets of cases can also be identified by searching for name of attorney or name of party (here "STATE OF TEXAS") and specifying a date range.

SERVICE OF SUIT PAPERS: CITATION, ORIGINAL PETITION, AND EXHIBITS

Adams sues student loan obligors wherever they live, whether in the State of Texas, or elsewhere. If they live in-state, he has them served by private process servers (rather than by certified mail or constable/sheriff). It they live out of state, he has them served by the Texas Secretary of State by certified mail. Sometimes, the original address of the defendant is incorrect or no longer current. Adams may then file an amended pleading with the updated address, and have it served. 

STUDENT LOAN CASE DOCUMENTS

The principal documents in a student loan case filed by John C. Adams consist of the following:

The PLAINTIFF'S ORIGINAL PETITION shows the Plaintiff as 'STATE OF TEXAS' or “THE STATE OF TEXASE” in the case style. This document has a copy of the signed promissory note or similar contract document and a loan disclosure page attached to it. If several loans are involved, there will be several such exhibits, usually bearing exhibit stickers A, B, C and so one, respectively -- one for each set of loan origination documents. There are a limited number of petition templates to accommodate the differences between loans and conditional grants, and the distinctions between in-state and out-of-state defendants. Within a category, the pleadings look alike except for the basic case-level data, i.e. defendant identity information and amount of principal. This is because they are all prepared with the same document template. Defendants are identified with prior names or alias, if applicable, address, and social security number. The latter is blackened out, or – in legal speak – redacted, because such data is sensitive and protected by privacy laws and rules.

The CITATION is normally prepared by the clerk of the court, but is here pre-printed as part of the AG student loan pleading template. It is served either by a process server or via the Texas Secretary of State (in the case of out-of-state debtors). After service on the defendant, the private process server will file a RETURN OF SERVICE in the form of a declaration under penalties of perjury attesting to service (with date and manner of service) or a declaration/affidavit of DUE DILIGENCE detailing service attempts that were unsuccessful. In the latter case, a motion for alternate service will likely be filed, unless the address for the Defendant was bad. 

A MOTION FOR ENTRY OF DEFAULT JUDGMENT is filed when the Defendant does not answer by the time his or her written answer is due, as stated on the CITATION. The motion is a one-page document accompanied by an affidavit by Cheryl Bellesen titled AFFIDAVIT IN SUPPORT OF FINAL JUDGMENT BY DEFAULT and an attorney fee affidavit by John C. Adams, the attorney who signs all pleadings and motions, and is the attorney in charge under rule 8 of the Texas Rules of Civil Procedure. AG Ken Paxton’s name is on the pleadings, but he is too busy to handle garden-variety litigation of this sort. A proposed default judgment is filed with the motion.

If the Defendant files an answer, and by doing so contests the lawsuit, a motion for default judgment is no longer appropriate under the rules governing civil suits, regardless of whether the answer is filed without a lawyer (pro se) or through an attorney. An attorney will typically file a document labeled DEFENDANT'S ORIGINAL ANSWER which will – at the minimum – contain a general denial. Some attorney’s also raise other issues. When an answer is filed by or on behalf of a student loan defendant,  Adams can be expected to file a MOTION FOR SUMMARY JUDGMENT because such a motion is the next-best procedural mechanism to quickly obtain a judgment in the creditor's favor.

In Texas state courts, it is enough to file a "general denial" to contest the case, which puts the burden on the Plaintiff to prove its cause of action, here breach of promissory note/loan agreement or breach of guaranty, depending on whether the student or the co-signer is named as the defendant. In student loan cases litigated by Adams, however, the evidence submitted to support a default judgment is virtually the same as the evidence submitted in support of summary judgment. These cases rarely reach the trial stage because they are disposed of by resort to alternative means: Motion for Default Judgment or Motion for Summary Judgment, Agreed Judgment, or formal agreement for a payment plan and associated stay of litigation. 

The motion filed in lieu of a motion for entry of default will be titled PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT and will be accompanied by an affidavit by Cheryl Bellesen titled AFFIDAVIT IN SUPPORT OF PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT and by an AFFIDAVIT IN SUPPORT OF ATTORNEY'S FEES by John C. Adams. 

All affidavits on the merits of the State's claim are signed by CHERYL BELLESEN, and are notarized by KATHERINE M. BUXTON, who is a notary without bond because she works in the Attorney General's Office, i.e. for the State of Texas. Buxton is a Legal Secretary and performs administrative functions, such as interacting with the clerks of the Travis County Courts at Law, in which the State's student loan cases are prosecuted.

Both a motion for entry of default judgment and a motion for summary judgment will have a proposed judgment attached, but it will not be titled "proposed" because Adams expects it to be signed as drafted (or rather, as computer-generated). The presiding judges of the county courts, Judge TODD WONG and Judge ERIC SHEPPERD, will normally sign Adams' judgments as presented, but may occasionally revise the amount of attorney's fees (downward) and may occasionally cross out interest or change the rate, if they find an error in the documentation. This is highly unlikely to happen in the default judgment context, however, because no one will be before the court to lodge any objections, or to point out any errors or omissions. Assistant Attorney General Adams himself does not make an in-court appearance for default judgments. The paperwork is simply submitted to the court by his legal secretary for approval and signing by either one of the two presiding judges (or, in rare instances, a visiting judge).  

NONSUIT, AGREED JUDGMENT, MOTIONS TO CONSOLIDATE

Occasionally, Assistant AG Adams files a nonsuit (voluntary dismissal) or a motion to consolidate two cases against the same defendant or two cases involving the same debt initially brought against a former student and the guarantor under two separate cause numbers, or an agreement for a payment plan signed by the Defendant. In the latter scenario, the case might be put on hold (stayed or abated). A great many cases, however, proceed speedily to a default judgment in the absence of a timely answer the Defendant or an agreement, provided that the service of citation was successful. If not, a motion for substitute service will likely be filed.

Debtors represented by attorney will also promptly face a motion for summary judgment (served on their attorney, instead of directly on them), but will have a better chance of such motion being postponed. It will thus win them time, even if they ultimately have a judgment entered against them. Apart from a delay in entry of judgment, the most attorneys for debtors can typically accomplish is a reduction of attorney’s fees, or a consolidation of cases when the attorney is hired to represent both the student-obligor and the co-signer, which will also likely yield a reduction in fees awarded because the duplication of fees is eliminated. 

AGREED JUDGMENTS, like default judgment, are uncontested, but - unlike default judgment, have been expressly agreed to by the Defendant and are signed by the Defendant in addition to being signed by Adams (for the State as Plaintiff) and by the judge. That means they are unappealable, but such an agreed judgment will nevertheless state that it is appealable because that language is on the template that Adams uses to submit such judgments.

Other agreements, such a payment plan, are in the nature of a contract and do not require the court's approval or signature.

Adams' agreed judgments typically reflect at best a reduction of the amount of attorney's fees from what they would otherwise be, but no reduction of principal or interest. Agreed judgment can generally not be attacked after they are signed by the court, which distinguishes them from default judgments, which may be appealed or attacked by post-judgment motion, albeit subject to certain rather unforgiving deadlines.

DISPOSITION BY DEFAULT: THE STANDARD PATTERN

In a large number of cases, the Defendants, who reside in locations all over the State (and some even beyond), never file an answer, and Adams then promptly moves for default judgment with two above-mentioned affidavits, one by Cheryl Bellesen attesting to the amounts owed (broken down by principal, accrued interest, and late fees, if any) and the applicable post-judgment interest rate (typically between 5% and 6%, in some cases as high as 9%) and an affidavit on attorney's fees.

UPPING THE ANTE WITH ATTORNEY'S FEES

Adams pleads for "not less than" $750.00 or $1,000 in attorney's fees in the petition that is served on the Defendant, but he routinely swears to a higher amount as reasonable and necessary once he moves for default or summary judgment.

Even if a Defendant answers the lawsuit, thus preventing a default judgment, he or she will not be able to effectively counter the fee claim because the reasonableness and necessity of attorney's fees is considered a matter on which expert testimony is required. Adam's boilerplate fee affidavit ipso facto qualifies as "expert testimony" because he is an attorney. It does not matter that it comes from an assembly line.

Courts take fee testimony as true (even if it is not) because it is not contested, and routinely enter judgment in the amount requested. If it comes to trial, pro se defendants face the same predicament. They are not qualified to offer testimony on attorney's fees because they are lay persons, and they will not even be aware of the large caseload Adams oversees, and how little time he actually spends on a single case.

ADAMS GETS HIS WAY

The county courts in Austin (Travis County) that process these student loan cases routinely grant everything Adams asks for, including $1,500 - $5,000 in attorney’s fees even though Adams would have spent less than an hour, probably more likely no more than a few minutes, on any one single case. With rare exceptions, such as when an attorney for a debtor challenges venue or the Bellesen’s affidavit, thus forcing Adams to do a little extra work, they are all cookie-cutter cases. If service on the defendant is successful and the defendant does nothing, a default judgment will be entered in due course.

Adams typically brings separate lawsuits against the student and the guarantor, and seeks separate judgments against the two defendants on the same debt (thus doubling the amount), and also duplicates the award of attorney's fees by pursuing this dual-track strategy. He may agree to consolidate such parallel lawsuits on the same debt, but that will likely only happen if both Defendant are represented by a single attorney, which is rare. Most Defendants do not have the benefit of legal assistance and are sitting ducks, to put it metaphorically.  

Two county courts process hundreds of student loan cases ("hear" would be a misleading term, given the prevalence of default judgments without court appearance) and do not require Adams to support the affidavit testimony on the amount outstanding in principal and interest with accounting records of any kind. Adams therefore does not submit any, basing the request for judgment solely on the testimony of Cheryl Bellesen. 

The only bits of data that vary among cases are the type and number of loans and amounts owed, the interest rate, the amount of attorney's fees, and the information that identifies the Defendant. Bellesen does not even specifically state whether the Defendant owes the money based on having signed the loan agreement/promissory note as student borrower, or whether the Defendant is being sued as a co-signer / guarantor. The remainder of her testimony is boilerplate, including the assertion that the Defendant has missed as many as six installment payments, which is what the Texas Education Code requires to trigger acceleration of the outstanding balance that would otherwise be payable over the course of many years, like a mortgage. Bellesen does not state in what amount monthly payments were required to be made by a particular defendant, and no documentation containing this information is submitted to the court (except, in rare instances, where it comes to a bench trial).  

The only documentation Adams typically provides to support a motion seeking judgment for the State are the loan origination documents (promissory note/cosigner guaranty and disclosure statement), which obviously do not reflect any payment history.

ATTORNEY ETHICS

As an assistant attorney general, Adams is not subject to the fair debt collection laws and routinely engages in litigation conduct that would violate the spirit, if not the letter, of consumer protection laws, if private collection attorneys and debt collection law firms engaged in it. Including those enforced by the same Attorney General, i.e. Texas Debt Collection Act and DTPA. 

Suing student loan obligors and guarantors in a county in which they do not reside is a practice that is mandated by statute, as the Education Code states that all such suits shall be filed in Travis County (Austin). Relative to the State as a whole, Austin is a small city and only a small percentage of the entire population of student loan obligors lives there. The vast majority of such Defendants are therefore faced with a lawsuit in a distant forum. In one recent instance, Adams even sued a Defendant long-distance in Japan. He regularly sues them in other states, serving them through the Texas Secretary of State.  

As to where student loan collection suits are filed, the Attorney General has no choice, though the mandatory venue provision was likely enacted for the Attorney General's convenience and efficiency in denigration of the competing interest of the Defendants, who would otherwise be entitled to defend a lawsuit in the county where they live.

The actual conduct of litigation, however, is a different matter. There is choice in how the Attorney General goes about managing the student loan caseload, and how he treats debtors, and some of the standard practices engaged in by Assistant AG Adams, with approval of his superiors - ultimately AG Ken Paxton - are both properly characterized as deceptive and abusive, as will be demonstrated below.

Deceptive representation as to the amount of damages and attorney's fees sought

When student loan defendants are served with law suit papers but do not answer, Adams promptly submits a motion for default judgment with an affidavit by Cheryl Bellesen that states the amount of principal, the amount of accrued interest, and the amount of late charges (if any). In some cases, the accrued interest is a substantial portion of the total. In the case of very old loans, the accrued interest may exceed half the amount of the principal, even if the interest rate is low (typically between 5 and 7 per cent).

When he files the original petitions, however, Adams only states the dollar amount of "the principal sum" even though the information on the full amount of the judgment he will be seeking is readily available. The difference is hidden in the phrase "plus interest." Why would Adams not state the full amount in the petition? The obvious answer is that a Defendant is less likely to fight the lawsuit if the amount of the debt is understated and is much lower than the amount of the judgment that will ultimately ensue.

The same with the attorney's fees. Adams plead a dollar figure for attorney's fees in most of his original petitions (either $750.00 or $1,000.00, depending on the type/amount of the loan), but he qualifies this specific dollar amount with the term “not less than” (In some cases, attorney's fees are mentioned, but no dollar figure is stated). 

At the point in time when Adams files the original petition, he knows that he will be asking for at least $1,500.00 in attorney’s fees, and as much as $5,000.00 in cases that involve higher loan balances. He knows this because seeking judgment for attorney’s fees in the range of $1,500.00 to $5,000.00 is an integral component of his office's standard operating procedures, and Adams personally signs and dates each one of the fee affidavits (assuming an image of his signature is not attached electronically). Needless to say, Defendants are generally not privy to this superior knowledge of the Attorney General's collection policies and practices, and associated standard operating procedures.

Example of Fee Aff from Default Judgment Case for $5,000.00 

While technically a pleaded claim for no less than $1,000 does not preclude a claim for $5,000, and can therefore not be said to be categorically false, it is nevertheless deceptive because a lay reader of ordinary intelligence will look at the specific dollar figure, and will not read and interpret "at least $1,000" as $1,000 times five, i.e. $5,000.00. 

Nor would it be reasonable for a defendant to reckon that the State's attorney will spend much time on the case if the Defendant decides not to contest it. Much rather, it would be reasonable for the defendant to assume that by not fighting the lawsuit, he or she will ease the workload for the State (and mitigate the State's damages, to the extent staff attorney time can be considered damages), and thereby keep the attorney's fees low. Notwithstanding, a defendant who does not respond to the lawsuit will then be hit with a default judgment that includes an award of attorney's fees that is higher than the $750.00 or $1,000.00 dollar figure in the petition that was served on the defendant.

Motions for default judgment are, in fact, highly automated and involve minimal attorney involvement. Just like the pleadings filed to open a new case, these motions all look alike except for a few case-level particulars such as defendant name, amount of principal and interest, and the applicable interest rate (5.25% for most loans, judgment interest of 5% if no interest rate is specified on the note). The affidavits in support of default are also very similar. Mass-produced with document production software. The attached promissory notes differ, or course, but they are preexisting documents, not documents created in the course of litigation.   

PROFESSIONAL BACKGROUND AND PRIOR EMPLOYMENT: JOHN C. ADAMS

Assistant Attorney General John C. Adams was in private practice as a solo from May 1996 to 1999. He reports that prior to that he was an Associate at Hull & Associates, P.C., which is a Houston debt collection firm owned by James N. Hull.

Texas court records also reflect that Adams was affiliated with FREEDMAN, HULL, MATHEWS & PRICE, P.C. in the early 1990s.

John C. Adams mostly represented companies and financial institutions while in private practice of law in Houston, Texas.

Adams is a graduate of the UH Law Center and was licensed in 1989, just a few months after he received his JD degree from U of H. His State Bar of Texas license number (SBOT or TBN number) is 00865800 and his public profile on State Bar's website does not reflect any derogatory disciplinary history. 
 

SAMPLE DOCUMENTS FROM AG STUDENT LOAN 

SUITS IN TRAVIS COUNTY  

[ANONYMIZED] 

ATTORNEY FEE AFFIDAVITS 

OLDER VERSION OF STANDARD FEE AFF WITHOUT AN HOURLY RATE (2013) 

EXAMPLE OF WHAT A DEFAULT JUDGMENT LOOKS LIKE   

EXAMPLE OF MOTION FOR  DEFAULT JUDGMENT AND SUPPORTING AFFIDAVIT 

GETTING SUED LONG-DISTANCE OUT OF STATE 

LIVING OUT OF STATE IN NY - NO PROBLEM - WE GOT JURISDICTION OVER YOU 

Being sued by Texas AG in California 

EXAMPLE OF MOTION FOR SUMMARY JUDGMENT AND SUPPORTING AFFIDAVIT 

EXAMPLE OF NONSUIT IN AG STUDENT LOAN SUIT 

EXAMPLE OF CONSOLIDATION OF TWO CASES INTO ONE   

Texas Student Loan Suits filed by the Texas Attorney General - Statutory Basis

The Texas Education Code puts the Texas Attorney General in charge of filing lawsuits to collect on defaulted loans administered by the Texas Higher Education Coordinating Board (THECB) through various student aid programs. The most common ones are College Access Loans ("CAL") and Texas B-ON-TIME ("BT") loans. There are also some conditional grants that turn into lawsuits when the conditions are not met. Some of the defaulted loans are very old, due to the fact that they are exempt for the statute of limitations. The Attorney General sues both student-borrowers and co-signers/guarantors, typically bringing separate lawsuits against each with unique cause numbers assigned to them, sometimes at the same time, but not always. Obligors on THECB loans are sued wherever they live, even out of state and out of the country.

All such collection suits are filed in Austin, TX, because venue is mandatory in Travis County. A single Assistant Attorney General handles all of these cases: Mr. John C. Adams.

See Debt Collector Profile of Texas Attorney John C. Adams.

The text of the the relevant Education Code Chapter can be found here

 --> Chapter 52 of the Tex. Educ. Code.

The text of the version of the statue as in effect as of July 2017 is pasted below:

EDUCATION CODE

TITLE 3. HIGHER EDUCATION

SUBTITLE A. HIGHER EDUCATION IN GENERAL

CHAPTER 52. STUDENT LOAN PROGRAM



SUBCHAPTER A. ADMINISTRATION



Sec. 52.01.  ADMINISTRATION.  The Texas Higher Education Coordinating Board, or its successors, shall administer the student loan program authorized by this chapter pursuant to Sections 50b-4, 50b-5, 50b-6, and 50b-7, Article III, Texas Constitution, and any former provision of the Texas Constitution authorizing bonds to finance educational loans to students.  Personnel and other expenses required to properly administer this chapter shall be funded by:

(1)  the general appropriations acts; or

(2)  any other source of revenue received by the board in connection with the operation of the student loan program.

Amended by: 

Acts 2007, 80th Leg., R.S., Ch. 1334 (S.B. 1640), Sec. 1.

Acts 2011, 82nd Leg., R.S., Ch. 1251 (S.B. 1799), Sec. 1.



Sec. 52.02.  DELEGATION OF POWERS AND DUTIES.  The board may delegate to the commissioner of higher education the powers, duties, and functions authorized by this chapter, except those relating to the sale of bonds and the letting of contracts for insurance.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.



Sec. 52.03.  BOARD INTEREST AND SINKING FUNDS.  (a)  The board by resolution may establish one or more interest and sinking funds as accounts in the state treasury.

(b)  A board interest and sinking fund established under this section consists of deposits made by the board as provided by this chapter.

(c)  A board interest and sinking fund established under this section may be used for any purpose related to the student loan program.

(d)  The board by resolution may create and provide the terms of administration and use of one or more accounts in a board interest and sinking fund established under this section.

Added by Acts 1993, 73rd Leg., ch. 571, Sec. 4, eff. Aug. 30, 1993.



Sec. 52.04.  BOARD STUDENT LOAN FUNDS.  (a)  The board by resolution may establish one or more board student loan funds as accounts in the state treasury.

(b)  A board student loan fund established under this section consists of deposits made by the board as provided by this chapter.

(c)  A board student loan fund established under this section may be used for any purpose related to the student loan program.

(d)  The board by resolution may create and provide the terms of administration and use of one or more accounts in a board student loan fund established under this section.

Added by Acts 1993, 73rd Leg., ch. 571, Sec. 4, eff. Aug. 30, 1993.



SUBCHAPTER B. BONDS



Sec. 52.11.  ISSUANCE OF BONDS.  (a)  The board may from time to time provide by resolution for the issuance of negotiable bonds in a total aggregate amount not exceeding $285 million.

(b)  All bonds shall be on a parity and shall be called the Texas College Student Loan Bonds.

(c)  The proceeds from the sale of bonds shall be placed in the Texas Opportunity Plan Fund.

(d)  To assure the orderly and economical marketing of the bonds and the reasonable availability of money in the Texas Opportunity Plan Fund, the bonds may be issued in installments.

(e)  The bonds of each issue shall be dated and shall bear interest at rates prescribed by the board, subject to the limitations imposed by law.  At the option of the board, the interest may be payable annually or semiannually.

(f)  The bonds shall mature serially or otherwise not later than 40 years from their date and may be redeemable before maturity, at the option of the board, at a price or prices and under terms and conditions fixed by the board in the resolution providing for the issuance of the bonds.

(g)  The board shall determine the form of the bonds, including the form of any interest coupon to be attached to the bonds, and shall fix the denomination or denominations of the bonds and the place or places for the payment of the principal and interest.

(h)  The bonds shall be executed on behalf of the coordinating board, or its successor, as general obligations of the State of Texas in the following manner:  They shall be signed by the chairman or vice chairman and the secretary of the board, and the seal of the board shall be impressed on them.  They shall be signed by the governor and attested by the secretary of state and the state seal impressed on them.  The resolution authorizing the issuance of any installment or series of bonds may prescribe the extent to which facsimile signatures and facsimile seals may be used in executing the bonds and appurtenant coupons.  Interest coupons may be signed with the facsimile signatures of the chairman or vice chairman and the secretary of the board.  In the event any officer whose manual or facsimile signature appears on any bond or coupon ceases to hold that office before the delivery of the bond or coupon, the signature will nevertheless be valid and sufficient for all purposes as if he had remained in office until the delivery had been made.

(i)  The resolution may provide for registration of the bonds as to ownership and for successive conversion and reconversion from registered to bearer bonds and vice versa.

(j)  Before any of the bonds issued are delivered to the purchasers, the record pertaining to the bonds shall be examined by the attorney general and the records and the bonds shall be approved by him.  After approval by the attorney general, the bonds shall be registered in the office of the comptroller of public accounts.  When approved, registered, and delivered to the purchasers, the bonds are incontestable and constitute general obligations of the State of Texas.

(k)  The performance of official duties prescribed by Article III, Section 50b, of the Texas Constitution, in reference to the provision for the payment and the payment of the bonds may be enforced in any court of competent jurisdiction through mandamus or other appropriate proceedings.

(l)  All bonds issued in accordance with the provisions of this chapter are negotiable instruments under the laws of this state.

(m)  The board may provide for the replacement of any bond which is mutilated, lost, or destroyed.

(n)  This section applies only to bonds issued under Article III, Section 50b, of the Texas Constitution.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.  Amended by Acts 1993, 73rd Leg., ch. 300, Sec. 28, eff. Aug. 30, 1993;  Acts 1993, 73rd Leg., ch. 571, Sec. 5, eff. Aug. 30, 1993.



Sec. 52.12.  REFUNDING BONDS.  (a)  The board may provide by resolution for the issuance of refunding bonds for the purpose of refunding any bonds issued under the provisions of this chapter and then outstanding, together with accrued interest on them.

(b)  The issuance of the refunding bonds, the maturities, and all other details of the bonds, the rights of the holders, and the duties of the board with respect to the bonds, shall be governed by the applicable provisions of Section 52.11 of this code.

(c)  The refunding bonds may be exchanged for the outstanding bonds or may be sold and the proceeds used to retire the outstanding bonds.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.



Sec. 52.13.  BONDS AS INVESTMENTS.  All bonds issued pursuant to the provisions of this chapter are legal and authorized investments for banks, savings banks, trust companies, building and loan associations, insurance companies, fiduciaries, trustees, and guardians, and for the sinking funds of cities, towns, villages, counties, school districts, and all other political subdivisions and public agencies of the State of Texas.  The bonds, when accompanied by all unmatured coupons appurtenant to them, are lawful and sufficient security for all deposits of state funds and of all funds of any agency or political subdivision of the state, and of counties, school districts, cities, and all other municipal corporations or subdivisions at the par value of the bonds.  The bonds and the income from them, including the profits made on their sale, shall at all times be free from taxation in this state.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.



Sec. 52.16.  PROCEEDS FROM BOND SALE.  All proceeds from the sale of bonds authorized by Article III, Section 50b, 50b-1, or 50b-2 of the Texas Constitution shall be deposited in the state treasury in the Texas Opportunity Plan Fund.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.  Amended by Acts 1993, 73rd Leg., ch. 571, Sec. 6, eff. Aug. 30, 1993.



Sec. 52.17.  INTEREST AND SINKING FUNDS.  (a)  Each fiscal year a sufficient portion of the funds received by the board as repayment of student loans granted under this chapter, as interest on the loans, and as other available funds relating to the student loan program shall be deposited in the state treasury in the Texas college interest and sinking fund or a board interest and sinking fund to:

(1)  pay the interest and principal coming due during the next fiscal year on all outstanding bonds issued under this chapter that are secured by money in, as applicable, the Texas college interest and sinking fund or a board interest and sinking fund; and

(2)  establish and maintain any reserves required by the board resolution authorizing the issuance of the bonds.

(a-1)  With respect to any bonds that remain outstanding under this chapter, the board may, subject to the terms of the applicable board resolution authorizing the issuance of those bonds:

(1)  reduce, eliminate, or replace any reserve portion of the Texas college interest and sinking fund or a board interest and sinking fund; and

(2)  apply any excess money in accordance with Subsection (b).

(b)  If in any year funds are received in excess of the foregoing requirements, then the excess may be:

(1)  deposited in the Texas Opportunity Plan Fund, the student loan auxiliary fund, or a board interest and sinking fund;

(2)  used to pay any costs of the board related to the operation of the student loan program;

(3)  used for any lawful purpose related to the student loan program;  or

(4)  used for the same purposes and upon the same terms and conditions prescribed for the proceeds derived from the sale of the bonds.

(c)  If funds received by the board in any fiscal year as repayment of student loans and as interest on the loans are insufficient to pay the interest coming due and the principal maturing on the bonds during the next fiscal year as described by Subsection (a), the comptroller shall transfer into the Texas college interest and sinking fund and each board interest and sinking fund out of the first money coming into the treasury that is not otherwise appropriated by the constitution an additional amount sufficient to pay that interest and principal.

(d)  The resolution authorizing the issuance of the bonds may provide for the deposit, from bond proceeds, of not more than 36 months' interest, and may provide for the use of bond proceeds as a reserve for the payment of principal of and interest on the bonds.

(e)  Amounts paid to the board by the federal Lender's Special Allowance program may:

(1)  be deposited in:

(A)  the Texas college interest and sinking fund; or

(B)  a board interest and sinking fund; or

(2)  be used by the board for the administration of student loan and grant programs administered by the board, including the making of grants under Subchapter M, Chapter 56.

(f)  Repealed by Acts 2013, 83rd Leg., R.S., Ch. 1155, Sec. 62(5), eff. September 1, 2013.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.  Amended by Acts 1985, 69th Leg., ch. 518, Sec. 1, eff. June 12, 1985;  Acts 1991, 72nd Leg., 1st C.S., ch. 4, Sec. 13.05, eff. Aug. 22, 1991;  Acts 1993, 73rd Leg., ch. 571, Sec. 7, eff. Aug. 30, 1993;  Acts 1997, 75th Leg., ch. 1423, Sec. 5.10, eff. Sept. 1, 1997;  Acts 2001, 77th Leg., ch. 1420, Sec. 8.214, eff. Sept. 1, 2001.

Amended by: 

Acts 2005, 79th Leg., Ch. 1181 (S.B. 1227), Sec. 4, eff. September 1, 2005.

Acts 2007, 80th Leg., R.S., Ch. 1334 (S.B. 1640), Sec. 6(a), eff. September 1, 2007.

Acts 2013, 83rd Leg., R.S., Ch. 1155 (S.B. 215), Sec. 62(5), eff. September 1, 2013.



Sec. 52.18.  DUTIES OF COMPTROLLER.  The comptroller of public accounts shall make the transfers required under the provisions of this chapter and shall pay or cause to be paid the principal of and interest on the bonds as they mature and come due.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.  Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 5.11, eff. Sept. 1, 1997.



Sec. 52.19.  INVESTMENT OF FUNDS.  All money in the Texas college interest and sinking fund and in each board interest and sinking fund, including any reserve portion, and all money in the Texas Opportunity Plan Fund and in the student loan auxiliary fund in excess of the amount necessary for student loans, and all money in each board student loan fund shall be invested by the comptroller in the investments prescribed by board resolution.  The board shall furnish to the comptroller a copy of the resolution prescribing authorized investments.  The board may sell any instruments owned in the Texas college interest and sinking fund, a board interest and sinking fund, the Texas Opportunity Plan Fund, the student loan auxiliary fund, or a board student loan fund at the prevailing market price.  Income from these investments may be deposited in any of those funds.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.  Amended by Acts 1991, 72nd Leg., ch. 4, Sec. 2, eff. Feb. 28, 1991;  Acts 1991, 72nd Leg., 2nd C.S., ch. 5, Sec. 2, eff. Aug. 29, 1991;  Acts 1993, 73rd Leg., ch. 571, Sec. 8, eff. Aug. 30, 1993;  Acts 1997, 75th Leg., ch. 1423, Sec. 5.12, eff. Sept. 1, 1997.

Amended by: 

Acts 2007, 80th Leg., R.S., Ch. 1334 (S.B. 1640), Sec. 6(b), eff. September 1, 2007.



Sec. 52.20.  STUDENT LOAN NOTES.  (a)  Promissory notes evidencing student loans made by the board with proceeds from bonds may be deposited and held in any fund as directed by the board resolution that authorized the issuance of the bonds.

(b)  The board may pledge and grant a security interest in all or any portion of those promissory notes to any person to further secure the payment of principal and interest on bonds issued under this chapter or of obligations under any contracts entered into by the board relating to the issuance of a series of bonds.

Added by Acts 1993, 73rd Leg., ch. 571, Sec. 9, eff. Aug. 30, 1993.



SUBCHAPTER C. STUDENT LOANS



Sec. 52.31.  PARTICIPATING INSTITUTIONS.  In this subchapter, "participating higher educational institution" means a public or private nonprofit institution of higher education, including a junior college, accredited by a recognized accrediting agency as defined by Section 61.003, or a regional education service center or other entity that offers an alternative educator certification program approved by the State Board for Educator Certification, that:

(1)  is located in this state; and

(2)  complies with the provisions of this chapter and the rules of the board promulgated in accordance with this chapter.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.

Amended by: 

Acts 2005, 79th Leg., Ch. 1181 (S.B. 1227), Sec. 5, eff. September 1, 2005.



Sec. 52.32.  QUALIFICATIONS FOR LOANS.  (a)  The board may authorize loans from the Texas Opportunity Plan Fund to a qualified applicant who:

(1)  is a resident of this state as defined by the board in accordance with Subchapter B, Chapter 54;

(2)  has been accepted for enrollment at a participating higher educational institution, provided that if the institution is a public or private postsecondary educational institution, the institution must be approved by an agency of the United States government for the purpose of guaranteeing the maker of such loans against loss due to the death, disability, or default of the borrower;

(3)  has established that the student has insufficient resources to finance the student's college education or alternative educator certification program;

(4)  has submitted to the board at least two references, including the names of the persons giving those references and appropriate contact information for those persons; and

(5)  has complied with other requirements established by the rules adopted by the board in conformity with this chapter.

(a-1)  Except as provided by Subsection (b), if the institution to which the applicant has been accepted for enrollment was not a participating institution, as defined by Section 52.31, on May 1, 1985, the applicant must provide evidence that the applicant is unable to obtain a guaranteed student loan from a commercial lender.

(b)  If a loan applicant is enrolled at a career school or college in a degree program that is approved by the board or at a regional education service center or other entity in an alternative educator certification program that is approved by the State Board for Educator Certification, the applicant is not required to provide evidence that the applicant is unable to obtain a guaranteed student loan from a commercial lender under Subsection (a-1).

(c)  In no event may a higher standard of academic performance be required of an applicant than the minimum standard required for enrollment in the participating institution.  The student must be meeting the minimum academic requirements of the institution in the semester any loan is made.

(d)  Repealed by Acts 2007, 80th Leg., R.S., Ch. 1334, Sec. 6(e)(2), eff. September 1, 2007.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.  Amended by Acts 1985, 69th Leg., ch. 892, Sec. 1, eff. Sept. 1, 1985;  Acts 1987, 70th Leg., 2nd C.S., ch. 23, Sec. 1, eff. Aug. 3, 1987;  Acts 1989, 71st Leg., ch. 1084, Sec. 2.01, eff. Sept. 1, 1989;  Acts 2003, 78th Leg., ch. 364, Sec. 2.01, eff. Sept. 1, 2003;  Acts 2003, 78th Leg., ch. 817, Sec. 8.16, eff. Sept. 1, 2003.

Amended by: 

Acts 2005, 79th Leg., Ch. 1181 (S.B. 1227), Sec. 6, eff. September 1, 2005.

Acts 2007, 80th Leg., R.S., Ch. 1334 (S.B. 1640), Sec. 6(e)(2), eff. September 1, 2007.



Sec. 52.321.  STANDARDS CONCERNING ABILITY TO REPAY CERTAIN LOANS.  In establishing requirements to be met by applicants for student loans authorized by the board under this chapter, the board may not establish standards relating to demonstration of ability to repay a federally insured student loan that are stricter for a certain class of applicants than for other applicants, except in cases where the applicant attends a school with a loan default rate of 15 percent or more.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.02, eff. Sept. 1, 1989.



Sec. 52.33.  AMOUNT OF LOAN.  The amount of the loan to any qualified applicant shall be limited to the difference between the financial resources available to the applicant, including but not limited to the applicant's income from parents and other sources, scholarships, gifts, grants, other financial aid, and the amount the applicant can reasonably be expected to earn, and the amount necessary to pay the applicant's reasonable expenses as a student at the participating institution of higher education where the applicant has been accepted for enrollment, under the rules and regulations adopted by the board.  The total loan to any individual student may never be more than the amount the student can reasonably be expected to repay in the maximum loan period provided by board rule, except as otherwise provided for in this chapter.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.  Amended by Acts 1987, 70th Leg., 2nd C.S., ch. 23, Sec. 2, eff. Aug. 3, 1987.

Amended by: 

Acts 2005, 79th Leg., Ch. 1181 (S.B. 1227), Sec. 7, eff. September 1, 2005.



Sec. 52.34.  PAYMENTS TO STUDENT.  (a)  No payment may be made to any student until the student has executed a note payable to the Texas Opportunity Plan Fund for the full amount of the authorized loan plus interest.

(b)  For the purposes of this chapter, a student has the capacity to contract and is bound by any contract executed by the student, and the defense that the student was a minor at the time the student executed the note is not available to the student in any action arising on the note.

(c)  Payments to students executing notes may be made annually, semiannually, quarterly, monthly, or for each semester as the board may determine, depending on the demonstrated capacity of the student to manage the student's financial affairs.

(d)  Disbursements may be made by the board or by the participating institution pursuant to a contract between the board and the institution executed in conformity with this chapter.

(e)  Money may be distributed to a participating institution only to make payments to a student under a loan authorized by this chapter.

(f)  The board shall distribute money to a participating institution through the electronic funds transfer system maintained by the Texas Guaranteed Student Loan Corporation for disbursing loan funds from commercial lenders participating in the guaranteed student loan program under Chapter 57, except that at the request of a participating institution the board may distribute the money through other means.  The board shall enter into a contract with the corporation for the use of the system, and the corporation shall make the system available to the board as necessary to carry out this subsection.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.  Amended by Acts 2003, 78th Leg., ch. 820, Sec. 45, eff. Sept. 1, 2003.



Sec. 52.35.  TERM OF LOANS.  The term of all authorized loans must be for the shortest possible period consistent with general practice by issuers of student loans, as determined by the board. 

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.  Amended by Acts 1971, 62nd Leg., p. 3339, ch. 1024, art. 2, Sec. 7, eff. Sept. 1, 1971;  Acts 1987, 70th Leg., 2nd C.S., ch. 23, Sec. 3, eff. Aug. 3, 1987.

Amended by: 

Acts 2005, 79th Leg., Ch. 1181 (S.B. 1227), Sec. 8, eff. September 1, 2005.



Sec. 52.36.  LOAN INTEREST AND FEES.  (a)  The board shall from time to time fix the interest to be charged for any student loan at a rate sufficient to pay the interest on outstanding bonds, any expenses incident to their issuance, sale, and retirement, and all or a portion of the board's expenses related to the operation of the student loan program.  Interest shall be postponed by the board as long as a student is enrolled at a participating institution and may be postponed at the board's discretion as long as a student is enrolled at any other higher educational institution, provided that the total interest paid is to be equal to that fixed at the time the note evidencing the loan is executed.

(b)  The board may charge and collect loan origination fees from borrowers for use in offsetting in whole or in part the operating expenses for the loans.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.  Amended by Acts 1979, 66th Leg., p. 785, ch. 347, Sec. 1, eff. June 6, 1979;  Acts 1987, 70th Leg., 2nd C.S., ch. 23, Sec. 4, eff. Aug. 3, 1987;  Acts 1993, 73rd Leg., ch. 571, Sec. 10, eff. Aug. 30, 1993.



Sec. 52.37.  INSURANCE.  The board may contract with any insurance company or companies licensed to do business in Texas for insurance on the life of any student borrower in an amount sufficient to retire the principal and interest owed under a loan made under the provisions of this chapter.  The cost of the insurance shall be paid by the student borrower.  No contract for insurance as provided for in this section may be approved except by the board during a regular meeting attended by a quorum of the total board membership.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.



Sec. 52.38.  REPAYMENT OF LOANS.  Repayment of any loan and interest authorized under this chapter shall be made monthly and shall begin not later than nine months after the date the student borrower is last enrolled in a participating institution or any other institution of higher education and in no event later than five years from the date the first note evidencing a loan under this chapter is executed.  The board may, however, authorize a longer period before beginning repayment of loans to medical students, dental students, and other students seeking professional or graduate degrees.  The board may extend the time for beginning repayment for unusual financial hardships, with the approval of the attorney general.  Repayment shall be made directly to the board or to a participating institution pursuant to a contract executed by the board in accordance with its rules and regulations.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.  Amended by Acts 1971, 62nd Leg., p. 3339, ch. 1024, art. 2, Sec. 7, eff. Sept. 1, 1971.



Sec. 52.39.  DEFAULT; SUIT.  When any person who has received or cosigned as a guarantor for a loan authorized by this chapter has failed or refused to make as many as six monthly payments due in accordance with an executed note, then the full amount of the remaining principal and interest becomes due and payable immediately, and the amount due, the person's name and last known address, and other necessary information shall be reported by the board to the attorney general.  Suit for the remaining sum shall be instituted by the attorney general, unless the attorney general finds reasonable justification for delaying suit and so advises the board in writing.  Venue for a suit arising under this section is exclusively conferred on a court of competent jurisdiction in Travis County.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.

Amended by: 

Acts 2013, 83rd Leg., R.S., Ch. 1155 (S.B. 215), Sec. 3, eff. September 1, 2013.



Sec. 52.40.  CANCELLATION OF CERTAIN LOAN REPAYMENTS.  (a)  The board may cancel the repayment of a loan received by a student who earns a doctorate of psychology degree and who, prior to the date on which repayment of the loan is to commence, is employed by the Department of Aging and Disability Services, the Department of State Health Services, or the Health and Human Services Commission and performs duties formerly performed by employees of the Texas Department of Human Services or Texas Department of Mental Health and Mental Retardation, the Texas Juvenile Justice Department, or the Texas Department of Criminal Justice.

(b)  A person who wishes to apply for a loan cancellation shall enter into a contract with the board which contains the following provisions:

(1)  No payment is due from the person as long as he is employed by one of the designated state agencies.

(2)  Half of the total amount of the loan plus interest due is to be cancelled after two years of the appropriate service, and the remainder is to be cancelled after two additional years of service.

(3)  Repayment of the loan and interest is to commence immediately if the person leaves the designated state agency before the expiration of two years;  repayment of one-half of the loan and interest is to commence immediately if the person leaves the designated state agency after completing two years service;  upon completion of four years service, the loan, principal and interest, shall be fully cancelled.

(4)  Interest continues to accrue until the loan is cancelled or repaid.

(c)  Loans and interest on loans may be cancelled under the Texas Opportunity Plan Fund in any year in a total amount not to exceed the amount appropriated for that purpose from general revenue funds.

(d)  The board shall publicize the availability of the loan cancellation procedures provided in this section at all institutions of higher education which offer graduate programs in psychology.

Added by Acts 1975, 64th Leg., p. 1344, ch. 503, Sec. 1, eff. Sept. 1, 1975.  Amended by Acts 1984, 68th Leg., 2nd C.S., ch. 28, art. III, part K, Sec. 1, eff. Sept. 1, 1984;  Acts 1985, 69th Leg., ch. 264, Sec. 33, eff. Aug. 26, 1985;  Acts 1985, 69th Leg., ch. 517, Sec. 2, eff. Sept. 1, 1985;  Acts 1989, 71st Leg., ch. 1084, Sec. 2.03, eff. Sept. 1, 1989.

Amended by: 

Acts 2009, 81st Leg., R.S., Ch. 87 (S.B. 1969), Sec. 25.052, eff. September 1, 2009.

Acts 2015, 84th Leg., R.S., Ch. 734 (H.B. 1549), Sec. 36, eff. September 1, 2015.



Sec. 52.41.  RESTRICTION ON ISSUANCE OF CERTAIN FEDERALLY INSURED STUDENT LOANS.  (a)  Except as provided by Subsection (c), the board may issue a student loan under the Federal Family Education Loan Program (20 U.S.C. Section 1071 et seq.), as amended, only to a borrower who has been or will be issued a student loan under another student loan program administered by the board.

(b)  The board may service any outstanding student loans issued by the board under the Federal Family Education Loan Program.

(c)  The board may issue student loans under the Federal Family Education Loan Program to borrowers other than borrowers described by Subsection (a) if the commissioner of higher education determines that market conditions warrant the issuance of those loans.

Added by Acts 2003, 78th Leg., ch. 820, Sec. 46, eff. Sept. 1, 2003.



SUBCHAPTER D. GENERAL PROVISIONS



Sec. 52.501.  DEFINITIONS.  In this chapter:

(1)  "Board" means the Texas Higher Education Coordinating Board.

(2)  "Board interest and sinking fund" means an interest and sinking fund established by the board under Section 52.03 of this code.

(3)  "Board student loan fund" means a student loan fund established by the board under Section 52.04 of this code.

(4)  "Bond" means a general obligation bond issued by the board under Section 50b-4, 50b-5, 50b-6, or 50b-7, Article III, Texas Constitution, or any former provision of the Texas Constitution authorizing bonds to finance educational loans to students.

(5)  "Student loan program" means the student loan program administered by the board under this chapter.

Added by Acts 1993, 73rd Leg., ch. 571, Sec. 1, eff. Aug. 30, 1993.  Amended by Acts 1995, 74th Leg., ch. 300, Sec. 2, eff. Nov. 7, 1995;  Acts 1999, 76th Leg., ch. 144, Sec. 2, eff. Nov. 2, 1999.

Amended by: 

Acts 2007, 80th Leg., R.S., Ch. 1334 (S.B. 1640), Sec. 2.

Acts 2011, 82nd Leg., R.S., Ch. 1251 (S.B. 1799), Sec. 2.



Sec. 52.51.  ADVISORY COMMITTEES.  The board may appoint advisory committees from outside its membership as it deems necessary to assist it in achieving the purposes of this chapter.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.



Sec. 52.52.  CONTRACTS.  (a)  Except as provided by this section, in achieving the goals outlined in this chapter and the performance of functions assigned to it, the board may contract with any other state governmental agency as authorized by law, with any agency of the United States, and with corporations, associations, partnerships, and individuals.

(b)  The board may not make an agreement with a guarantor concerning any insured student loans the board authorizes that requires the board to file suit or take other action to collect on a defaulted loan beyond the 365th day after the official default date occurs on the loan, unless such a requirement is imposed by the guarantor on other lenders making the same kind of insured student loans.

(c)  Not later than January 1, 1991, the board shall amend its contract with the United States Department of Education that requires the board to file suit to obtain judgment on a defaulted loan before filing a claim on the defaulted loan with the guarantor to reflect the requirement in Subsection (b) of this section.

(d)  The board may approve and enter into agreements that are necessary for the operation of the student loan program or that relate to the issuance of bonds.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.  Amended by Acts 1989, 71st Leg., ch. 1084, Sec. 2.04, eff. Sept. 1, 1989;  Acts 1993, 73rd Leg., ch. 571, Sec. 11, eff. Aug. 30, 1993.



Sec. 52.521.  FILING OF CLAIMS ON LOANS IN DEFAULT.  (a)  The board shall file a claim with the appropriate guarantor on an insured loan in default as soon as it is practicable to do so in accordance with the guarantor's rules.

(b)  The board shall deposit funds obtained as a result of any claims, including claims filed on loans in default that have been litigated as provided under a contract with the United States Department of Education, filed with a guarantor in the Texas Opportunity Plan Fund or in the student loan auxiliary fund in the appropriate account to be used for making student loans.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.05, eff. Sept. 1, 1989.  Amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 5, Sec. 3.



Sec. 52.53.  GIFTS AND GRANTS.  The board may accept gifts, grants, or donations of real or personal property from any individual, group, association, or corporation or the United States, subject to limitations or conditions set by law.  The board shall deposit gifts, grants, or donations of money in the Texas Opportunity Plan Fund or in the student loan auxiliary fund and shall separately account for and expend the funds in accordance with the specific purpose for which given and under such conditions as are imposed by the donor and as provided by law.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.  Amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 5, Sec. 4.



Sec. 52.54.  RULES AND REGULATIONS.  (a)  The board shall adopt and publish rules and regulations to effectuate the purposes of this chapter in accordance with and under the conditions applied to other agencies by Chapter 274, Acts of the 57th Legislature, Regular Session, 1961, as amended (Article 6252-13, Vernon's Texas Civil Statutes).

(b)  The board may adopt rules and regulations necessary for participation in the federal guaranteed loan program provided by the Higher Education Act of 1965 (Public Law 89-329).

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.  Amended by Acts 1971, 62nd Leg., p. 3340, ch. 1024, art. 2, Sec. 7, eff. Sept. 1, 1971.



Sec. 52.541.  ACCOUNTS FOR LOAN PROGRAMS.  (a)  The board shall establish separate accounting within the Texas Opportunity Plan Fund and the student loan auxiliary fund for each of its existing loan programs, including accounting for the federally insured loans that are insured by the United States Department of Education, the federally insured loans that are insured by the United States Department of Health and Human Services, and each loan program that consists of loans insured by the State of Texas.

(b)  If a loan program is established after September 1, 1989, the board shall establish separate accounting within the Texas Opportunity Plan Fund and the student loan auxiliary fund for that loan program.

(c)  The board may transfer funds between the Texas Opportunity Plan Fund and the student loan auxiliary fund and among the separate accounts established under this section within those funds if:

(1)  the transfer is approved by the board and is necessary to administer the Texas Opportunity Plan Fund or the student loan auxiliary fund; and

(2)  the reason for the transfer is documented in the accounting of the funds.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.06, eff. Sept. 1, 1989.  Amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 5, Sec. 4.

Amended by: 

Acts 2007, 80th Leg., R.S., Ch. 1334 (S.B. 1640), Sec. 6(c), eff. September 1, 2007.



Sec. 52.55.  AUDIT.  All transactions under the provisions of this chapter are subject to audit by the state auditor.

Acts 1971, 62nd Leg., p. 3072, ch. 1024, art. 1, Sec. 1, eff. Sept. 1, 1971.



SUBCHAPTER E. COLLEGE SAVINGS BONDS



Sec. 52.61.  DEFINITIONS.  In this subchapter:

(1)  "College savings bond" means a general obligation bond issued by the board under Article III, Section 50b-2, of the Texas Constitution.

(2)  "Postsecondary educational institution" includes an institution of higher education as that term is defined by Section 61.003 of this code and private institutions approved for purposes of the tuition equalization program under Subchapter F of Chapter 61 of this code.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.08.



Sec. 52.62.  ESTABLISHMENT OF SAVINGS BONDS PROGRAM;  USE OF BOND PROCEEDS.  (a)  The college savings bonds program is established to provide the public with a method of saving that encourages enrollment at postsecondary educational institutions.

(b)  The college savings bonds issued by the board under this subchapter are part of the Texas Opportunity Plan Fund, and the proceeds from the bonds shall be invested as provided by Subchapter B of this chapter  and may be used for student loans as provided by Subchapter C of this chapter. 

(c)  The proceeds from the college savings bonds issued under this subchapter may be used for the costs associated with the issuance of the bonds, including the cost of marketing the bonds.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.08.



Sec. 52.63.  PUBLIC PURPOSE.  The legislature finds and declares that this subchapter:

(1)  by authorizing the issuance of general obligation bonds as college savings bonds provides the public with a method of saving that encourages enrollment at postsecondary educational institutions;  and

(2)  by encouraging enrollment at postsecondary educational institutions, this subchapter promotes the public welfare and economic development of this state and, consequently, serves an important public purpose.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.08.



Sec. 52.64.  ADMINISTRATION OF SAVINGS BONDS PROGRAM;  RULES.  (a)  The board shall administer the college savings bonds program.

(b)  The board may adopt any rules necessary to administer this subchapter.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.08.



Sec. 52.65.  EFFECT ON OTHER FINANCIAL AID.  In determining the eligibility of a student for a scholarship, grant, or other monetary assistance awarded by a state agency, an amount of $10,000 or less in proceeds from savings bonds, including principal and accumulated interest, may not be considered in determining the amount or form of financial assistance to provide to the student.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.08.



Sec. 52.66.  AUTHORITY TO ISSUE.  (a)  The board shall issue and sell college savings bonds in a total aggregate amount not exceeding $75 million authorized under Article III, Section 50b-2, of the Texas Constitution.

(b)  The college savings bonds may be sold in the manner and in the amounts determined by the board and as provided by this subchapter.

(c)  College savings bonds may be sold at a negotiated sale if the board determines that a negotiated sale will result in either a more efficient and economic sale of the college savings bonds or greater access to the college savings bonds by residents of this state.

(d)  If any college savings bonds are sold at a negotiated sale, the underwriter to whom those bonds are sold must, in the judgment of the board, have sufficient capability to make a broad distribution of those bonds to investors resident in this state.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.08.



Sec. 52.67.  SECURITY OF SAVINGS BONDS;  GENERAL OBLIGATION.  The college savings bonds authorized under Article III, Section 50b-2, of the Texas Constitution and issued in accordance with this subchapter are general obligations of this state.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.08.



Sec. 52.68.  TERMS.  (a)  Savings bonds issued under this subchapter must mature serially or otherwise not more than 25 years after they are issued.

(b)  The college savings bonds:

(1)  must be zero coupon bonds, capital appreciation bonds, compound interest bonds, municipal multiplier bonds, capital accumulator bonds, or a similar type of bond that will encourage the purchaser to hold the bond until maturity;  and

(2)  must be issued in small denominations of $1,000 or less at a price the board determines to be the most advantageous reasonably obtainable and that renders the bonds attractive for the purpose of financing the costs of higher education.

(c)  The college savings bonds may not be redeemed by the state before maturity.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.08.



Sec. 52.69.  DETERMINATION OF AGGREGATE PRINCIPAL AMOUNT OF BONDS.  The aggregate principal amount of the college savings bonds issued under this subchapter shall be the aggregate of the initial offering prices, not including accrued interest, at which those bonds are offered for sale to the public, including private or negotiated sales, or sold to the initial purchasers in a private placement, without a reduction for an underwriter's discount or fees of a placement agent or other intermediary.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.08.



Sec. 52.70.  MARKETING AND DISTRIBUTION OF BONDS.  (a)  The board shall coordinate the marketing and distribution of the college savings bonds.

(b)  The board may use its staff to assist in the marketing and distribution of the college savings bonds or may contract with another entity for services to carry out some or all of those duties.

(c)  In marketing the college savings bonds, the board shall emphasize the use of those bonds to finance the costs of higher education.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.08.



Sec. 52.71.  MANDAMUS.  The performance of official duties prescribed by this subchapter and Article III, Section 50b-2, of the Texas Constitution, in reference to the payment of the college savings bonds, may be enforced in a court of competent jurisdiction by mandamus or other appropriate proceedings.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.08.



Sec. 52.72.  REPLACEMENT OF BOND.  The board may provide for the replacement of any college savings bond that is mutilated, lost, or destroyed.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.08.



Sec. 52.73.  APPROVAL AND REGISTRATION.  (a)  College savings bonds issued by the board and the records relating to their issuance must be submitted to the attorney general for examination as to their validity.

(b)  If the attorney general finds that the college savings bonds have been authorized in accordance with law, the attorney general shall approve them, and the comptroller of public accounts shall register the bonds.

(c)  Following approval and registration, the college savings bonds are incontestable and are binding obligations according to their terms.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.08.



Sec. 52.74.  EXEMPTION FROM TAXATION.  College savings bonds issued under this subchapter may not be taxed by the state or any of its political subdivisions.

Added by Acts 1989, 71st Leg., ch. 1084, Sec. 2.08.



SUBCHAPTER F. ADDITIONAL BONDS



Sec. 52.81.  DEFINITIONS.  In this subchapter:

(1)  "Board" means the Texas Higher Education Coordinating Board.

(2)  "Bond" means a general obligation bond issued by the board under former Section 50b-3 or Section 50b-4, 50b-5, 50b-6, or 50b-7, Article III, Texas Constitution.

(3)  "Fund" means the student loan auxiliary fund.

Added by Acts 1991, 72nd Leg., 2nd C.S., ch. 5, Sec. 1.  Amended by Acts 1995, 74th Leg., ch. 300, Sec. 3, eff. Nov. 7, 1995;  Acts 1999, 76th Leg., ch. 144, Sec. 3, eff. Nov. 2, 1999.

Amended by: 

Acts 2007, 80th Leg., R.S., Ch. 1334 (S.B. 1640), Sec. 3.

Acts 2011, 82nd Leg., R.S., Ch. 1251 (S.B. 1799), Sec. 3.



Sec. 52.82.  ISSUANCE;  SALE.  (a)  The board may by resolution authorize the issuance of general obligation bonds.  The principal amount of outstanding bonds issued under this section must at all times be equal to or less than the amount provided by Section 50b-7, Article III, Texas Constitution.

(b)  Before the board may issue bonds under this subchapter, the Bond Review Board must review and approve the bonds under Chapter 1231, Government Code.

(c)  The board may sell the bonds at a negotiated sale if the board determines that a negotiated sale is a more efficient and economical method of selling the bonds.  If the board has determined that the bonds will be sold by competitive bid, the board by resolution shall prescribe the manner of giving notice of the sale.

(d)  The total amount of bonds issued by the board in a state fiscal year may not exceed $350 million.

Added by Acts 1991, 72nd Leg., 2nd C.S., ch. 5, Sec. 1.  Amended by Acts 1995, 74th Leg., ch. 300, Sec. 4;  Acts 1999, 76th Leg., ch. 144, Sec. 4;  Acts 2001, 77th Leg., ch. 1420, Sec. 8.215, eff. Sept. 1, 2001;  Acts 2003, 78th Leg., ch. 779, Sec. 2, eff. June 20, 2003.

Amended by: 

Acts 2007, 80th Leg., R.S., Ch. 1334 (S.B. 1640), Sec. 4.

Acts 2007, 80th Leg., R.S., Ch. 1334 (S.B. 1640), Sec. 6(d), eff. September 1, 2007.

Acts 2011, 82nd Leg., R.S., Ch. 1251 (S.B. 1799), Sec. 4.



Sec. 52.83.  TERMS.  (a)  Except as provided by this subchapter, the board by resolution may provide the terms and name of the bonds.

(b)  The bonds must be dated and bear interest at a rate or rates prescribed by the board in accordance with the resolution for the issuance of the bonds, except that the rate may not exceed the maximum net effective rate allowed by law.  The resolution may provide for:

(1)  any type of rate, including a fixed, variable, floating, or adjustable rate;  and

(2)  any arrangement for the periodic determination of interest rates, including a formula, index, or contract.

(c)  The bonds must mature serially or otherwise not later than the 40th year after the date of their issuance.

(d)  The bonds may have a different face value from other bonds issued by the board.

Added by Acts 1991, 72nd Leg., 2nd C.S., ch. 5, Sec. 1.  Amended by Acts 1993, 73rd Leg., ch. 571, Sec. 12, eff. Aug. 30, 1993.



Sec. 52.84.  EXECUTION;  REGISTRATION.  The resolution authorizing the issuance of the bonds may provide for the manner of execution and for the registration of ownership of the bonds.

Added by Acts 1991, 72nd Leg., 2nd C.S., ch. 5, Sec. 1.



Sec. 52.85.  MARKETING;  DISTRIBUTION.  (a)  The board shall coordinate the marketing and distribution of the bonds.

(b)  The board may use its staff to market and distribute the bonds or may contract with another entity to market and distribute the bonds.

Added by Acts 1991, 72nd Leg., 2nd C.S., ch. 5, Sec. 1.



Sec. 52.86.  APPROVAL AND REGISTRATION.  (a)  The attorney general shall examine the bonds and the records relating to the bonds' issuance.

(b)  If the attorney general finds that the bonds have been issued in accordance with law, the attorney general shall approve the bonds, and the comptroller of public accounts shall register the bonds.

(c)  Following approval and registration, the bonds are incontestable and are binding obligations according to their terms.

Added by Acts 1991, 72nd Leg., 2nd C.S., ch. 5, Sec. 1.



Sec. 52.87.  MANDAMUS.  The performance of official duties prescribed by this subchapter and by former Section 50b-3 and Sections 50b-4, 50b-5, 50b-6, and 50b-7, Article III, Texas Constitution, in reference to the payment of the bonds, may be enforced in a court of competent jurisdiction by mandamus or other appropriate proceedings.

Amended by: 

Acts 2011, 82nd Leg., R.S., Ch. 1251 (S.B. 1799), Sec. 5.



Sec. 52.88.  REPLACEMENT OF BOND.  The board may provide for the replacement of a bond that is mutilated, lost, or destroyed.

Added by Acts 1991, 72nd Leg., 2nd C.S., ch. 5, Sec. 1.



Sec. 52.89.  FUND.  (a)  A special fund to be known as the student loan auxiliary fund is created in the state treasury.

(b)  The fund consists of proceeds from the sale of the bonds deposited in accordance with this section, gifts or grants made to the board for purposes of the fund, and deposits made as authorized by this chapter.

(c)  The board shall deposit to the credit of the fund any proceeds from the sale of bonds, excluding:

(1)  any accrued interest on the bonds which shall be deposited in the board interest and sinking fund relating to the bonds; and

(2)  proceeds from the sale of bonds issued by the board under Section 56.464(b), as that subsection existed immediately before September 1, 2015.

(c-1)  Repealed by Acts 2015, 84th Leg., R.S., Ch. 1243 , Sec. 8(1), eff. September 1, 2015.

(d)  The board by resolution may create and provide the terms of the administration and use of an interest and sinking account or other accounts in the fund.

Added by Acts 1991, 72nd Leg., 2nd C.S., ch. 5, Sec. 1.  Amended by Acts 1993, 73rd Leg., ch. 571, Sec. 13, eff. Aug. 30, 1993;  Acts 2003, 78th Leg., ch. 779, Sec. 3, eff. June 20, 2003.

Amended by: 

Acts 2015, 84th Leg., R.S., Ch. 1243 (H.B. 700), Sec. 1, eff. September 1, 2015.

Acts 2015, 84th Leg., R.S., Ch. 1243 (H.B. 700), Sec. 8(1), eff. September 1, 2015.



Sec. 52.90.  LOANS FROM FUND.  (a)  The board  shall make a loan from the fund to a student who qualifies for a loan under Subchapter C.

(b)  Loans from the fund are governed by Subchapter C.

(c)  The board may charge and collect a loan origination fee from a person who receives a loan from the fund.  The board may use the fee to pay operating expenses for making loans under this section.

Added by Acts 1991, 72nd Leg., 2nd C.S., ch. 5, Sec. 1.  Amended by Acts 2003, 78th Leg., ch. 779, Sec. 4, eff. June 20, 2003.

Amended by: 

Acts 2015, 84th Leg., R.S., Ch. 1243 (H.B. 700), Sec. 2, eff. September 1, 2015.



Sec. 52.91.  BONDS FOR FORMER TEXAS B-ON-TIME STUDENT LOAN PROGRAM.

(a)  The board shall deposit to the credit of the Texas B-On-time student loan account established under Section 56.0092 any proceeds from the sale of bonds issued by the board to fund Texas B-On-time student loans under Section 56.464(b), as that subsection existed immediately before September 1, 2015, other than  accrued interest on the bonds, which shall be deposited to the credit of the interest and sinking fund related to the bonds.

(b)  Repealed by Acts 2015, 84th Leg., R.S., Ch. 1243 , Sec. 8(1), eff. September 1, 2015.

(c)  The board shall repay bonds described by Subsection (a) using proceeds from the bonds, legislative appropriations, and money collected by the board as repayment for Texas B-On-time student loans awarded by the board under Section 56.0092(c) for a semester or term occurring before the 2020 fall semester.  The board may also repay the bonds by using tuition set aside under Section 56.465, as that section existed immediately before September 1, 2015, for a semester or term occurring before the 2015 fall semester.  The board may not repay the bonds with money collected by the board as repayment for student loans awarded by the board under Subchapter C.

Added by Acts 2003, 78th Leg., ch. 779, Sec. 4, eff. June 20, 2003.

Amended by: 

Acts 2005, 79th Leg., Ch. 1181 (S.B. 1227), Sec. 9, eff. September 1, 2005.

Acts 2005, 79th Leg., Ch. 1230 (H.B. 1172), Sec. 2, eff. June 18, 2005.

Acts 2015, 84th Leg., R.S., Ch. 1243 (H.B. 700), Sec. 3, eff. September 1, 2015.

Acts 2015, 84th Leg., R.S., Ch. 1243 (H.B. 700), Sec. 4, eff. September 1, 2015.

Acts 2015, 84th Leg., R.S., Ch. 1243 (H.B. 700), Sec. 8(1), eff. September 1, 2015.