          ~THF,    ATIKBRNEY            GENERAL
                        OFTEXAS



                         June 2, 1972


Hon. Bevington Reed, Commissioner        Opinion No. M- 1133
Coordinating Board
Texas College and University System      Re:   Authority of Coor-
P. 0. Box 12788, Capitol Station               dinating Board to
Austin, Texas 78711                            impose charges for
                                               late repayment of
                                               loans due under the
                                               college student loan
                                               program, pursuant to
                                               Sections 52.01, et
                                               seq., Texas Education
                                               Code, and related
Dear Dr. Reed:                                 question.

          Your recent letter requesting the opinion of this
office concerning the referenced matter states, in part, as
follows:

          "The Coordinating Board is considering
     authorization of a fee to be charged to a Hinson-
     Hazlewood College Student Loan borrower when a
     repayment on a loan is received later than ten
     days following the date the payment is due, and
     we respectfully request your opinion concerning
     the legality of such a procedure.  Specifically,
     does the Coordinating Board have statutory
     authority to assess and collect such charges
     on Hinson-Hazlewood College Student Loan accounts?

          "If it is determined that the Coordinating
     Board does have authority to assess and collect
     such a charge, does such authority extend to both
     the federally insured interim notes (negotiated
     since August 15, 1971, subsequent to passage of



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Hon. Bevington Reed, page 2,   (M-1133)



     Senate Bill No. 527 and subsequent to the date
     of our entry into the contract for federal
     insurance) as well as to those interim notes
     negotiated prior to entry into the federal
     program? . . . .II

          The Texas Opportunity Plan Fund, to provide loans
to college students, was established by the provisions of
Section 50b of Article III of the Constitution of Texas.
Pursuant to said constitutional authorization, Article 2654g,
Vernon's Civil Statutes was enacted, and established detailed
procedures for the operation and funding of the Texas Oppor-
tunity Plan. Article 2654g was repealed in its entirety, and
recodified as Sections 52.01, et seq., Texas Education Code,
by the 62nd Legislature in 1971.

          While there is no express provision in these statutes
for authority to contract with the student for late charges
or fees as such, there is no provision therein which could be
construed as depriving the Coordinating Board of so contract-
ing with the student. Furthermore, as hereinafter shown,
Section 52.36 of the Code does permit such interest to be
charged as is reasonable and necessary to finance the program
and expenses incidental thereto.

          On April 21, 1972, the Coordinating Board made its
own interpretation of the statutes and voted to provide for
an additional interest charge of five percent of the monthly
payment or $5.00, whichever is less, for student borrowers
whose payments become more than ten days overdue. This problem
has given the Board substantial concern, and the action was
taken because of its expressed need "to improve on the default
rate for the loan program."

          The construction of statutes by the administrative
agency charged with their enforcement and administration is
entitled to great weight in the courts, and while not control-
ling, such construction in cases of doubt will generally be
followed unless clearly wrong. Armco Steel Corp. v. Texas



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Hon. Bevington Reed, page 3,   (M-1133)



Employment Commission, 386 S.W.2d 894 (Tex.Civ.App. 1965,
error ref., n.r.e.); Attorney General Opinion No. M-1082
(1972); 53 Tex.Jur. 2d 276-277, Statutes, Sec. 183; pp.265-
266, Sec. 178.

          The statutes here involved, being a part of the
Texas Education Code, must be interpreted in accordance with
the rules to aid in the construction of codes set out in
Article 5429b-2, Vernon's Civil Statutes, the Code Construc-
tion Act. The construction aids are declared to apply,
whether or not the statutes are considered ambiguous.  Sec-
tion 3.03 requires among other matters, consideration of the
object sought to be attained, the consequences of a particular
construction, and the administrative construction of the
statute. Section 3.01 authorizes a presumption to be indulged,
among other things, that a just and reasonable result was in-
tended and that the public interest is favored over any private
interest. Section 3.02 requires that the statutes be presumed
to be prospective in their operation unless expressly made
retrospective.

          Furthermore, these revised statutes, under Article
10(8), Vernon's Civil Statutes ". . . shall be liberally
construed with a view to effect their objects and to promote
justice." Section 52.32 gives the power to authorize student
loans from the Texas Opportunity Plan Fund, and Section 52.34
of the Education Code provides that,

          "No payment may be made to any student until
     he has executed a note payable to the Texas
     Opportunity Plan Fund for the full amount of the
     authorized loan plus interest. For the purposes
     of this Chapter, a student has the capacity to
     contract and is bound by any contract executed
     by him, and the defense that he was a minor at
     the time he executed the note is not available
     to him in any action arising on the note."




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Hon. Bevington Reed, page 4,   (M-1133)



          Section 52.35 of the Code leaves the term of loans
made to the discretion and determination by the Board, con-
sistent with the guidelines that they must be made in duration
for the shortest possible period and no longer than ten years
from the student's enrollment, "except as a longer period is
authorized for medical students, dental students, and students
seeking professional or graduate degrees as authorized under
the provisions of Section 52.38 of this Code."

          Section 52.36 of the Code provides that the Board
shall annually "fix the interest to be charged for any student
loan at a rate sufficient to pay the interest on outstanding
bonds plus any expenses incident to their issuance, sale, and
retirement."

          Section 52.38 of the Code provides for monthly
repayment of loans. The time duration and extension of time
for repayments is left to the Board's discretion, based on
consideration of "financial hardships, with the approval of
the Attorney General."  Repayments are directed therein to 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."

          Suit upon automatic default is provided after the
student borrower fails and refuses to make six monthly payments
due "in accordance with an executed note" in Section 52.39 of
the Code.

          Under Section 52.54(a) and (b) of the Code, the Board
is required to adopt and publish rules and regulations to
effectuate the purposes of the program and may also adopt rules
and regulations for participation in the federal guaranteed
loan program provided by the Higher Education Act of 1965 (20
U.S.C.A. Sec. 421, -et seq.).

          The specific power of the Board to contract with any
governmental agency, business entity or individual in achieving
the purposes of the program and the performance of its functions
is set out in Section 52.52.


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Hon. Bevington Reed, page 5,   (M-1133)



          From the foregoing, it appears that the Legislature
has in general terms provided for the Board to administer and
finance that student loan program, leaving discretion to the
Board to carry out the incidental details by the promulgation
of rules and regulations and through the power to contract
with the student for the loan amount, terms, time and provi-
sions for repayment of the loan, including the fixing of the
amount of interest to cover the expenses incident to the
financing of the bond obligations. While not specifically
mentioned, we think the matter of providing, as a part of
the voluntary loan contract, for an additional interest charge
to cover the expenses incident to collection of delinquent
payments which are a part of the total cost of the bond
financing program, is necessarily implied in the general grant
of authority to the Board to carry out its administration and
enforcement of the loan program. Such a charge is usual and
customary and to be reasonably expected by the parties in the
conduct of all other commercial and business transactions.

          We think the pertinent rule of statutory construc-
tion here applicable is that the statutory grant of such ex-
press powers carries with it, by implication, every incidental
power that is necessary and proper to the execution of the
powers expressly granted. Terre11 v. Sparks, 104 Tex. 191,
135 S.W. 519 (1911); 53 Tex.Jur.2d 203, Statutes, Sec. 141.

          A statutory construction that the Legislature in-
tended to leave the Board powerless to do anything about late
payments and to permit delinquent borrowers to have the free
use of the money borrowed for periods of time at the expense
of the public is not a just and reasonable result and favors
the private over the public interest. We reject such a con-
struction in favor of that adopted by the administrative agency,
to which the Legislature has given the responsibility of super-
vising and operating the student loan program.

          We also note that the portion of the Higher Education
Act of 1965 dealing with loans to students in institutions of
higher learning is the National Defense Education Act, found



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Hon. Bevington Reed, page 6,   (M-1133)



at 20 U.S.C. 421, et seq., Subsection     (c) of 20 U.S.C. 425
provides, in part,That

          "Pursuant to regulations of the (U.S.)
     Commissioner (of Education), an institution
     may assess a charge with respect to a loan
     from the loan fund established by the insti-
     tution pursuant to this subchapter for failure
     of the borrower to pay all or any part of an
     installment when it is due. . . ." (Emphasis
     added.)

          Since the Board has entered into a contract to
participate in the federal guaranteed loan program provided
by the Higher Education Act of 1965, it may adopt rules and
regulations providing for additional charges where the borrower
fails to pay all or any part of an installment when it is due.

          With respect to those loans not connected with the
federal guaranteed loan program, we would here point out that
the provision for assessing an additional interest charge as
an expense incident to the bond financing program is subject
to Board action annually, not later than September 1, under
Section 52.36 of the Code. This statute is constructive
notice to the contracting parties and may be read into the
note or contract as a part thereof. Anderson - Berney Realty
Co. v. Sovia, 41 S.W.2d 279 (1931), affd. 123 Tex. 100, 67
S.W.2d 222; 12 Am.Jur.2d 769, Contracts, Sec. 240; Attorney
General Opinion No. M-1034 (1971). The charge made should
be based upon this consideration and bear a proportional
relationship to the amount of the particular loan as made.

          Your second question concerns whether or not the
Board has the authority to provide for late payment charges
as to both the federally insured interim notes (negotiated
since August 15, 1972, subsequent to passage of Senate Bill
No. 527 and subsequent to the date of your entry into the
contract for federal insurance) as well as to those interim
notes negotiated prior to entry into the federal program.



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.      .




    Hon. Bevington Reed, page 7,      (M-1133)



    You have advised that the proposed late charge is consistent
    with the requirements of the federally insured student loan
    program in which the Hinson-Hazlewood College Student Loan
    Program is now a participant, and that you have adopted such
    amendment, which will be implemented in a manner consistent
    with the Federal Reserves Regulation 2, Truth and Lending in
    Consumer Credit Cost Disclosure.   In view of Section 52.54
    of the Texas Education Code and the federal statutes and
    regulations above cited, which constitute constructive
    notice to all parties at all relevant times and may be read
    into any notes or contracts executed in connection with the
    federal program, and particularly in view of your adminis-
    trative construction and adoption of the proposal, we also
    answer your second question in the affirmative.

                            SUMMARY
                            -------

                The Coordinating Board has the authority to
           promulgate rules and regulations for interest
           charges on delinquent repayments of student loan
           accounts pursuant to Sections 52.01, et seq.,
           Texas Education Code, and may so provze for the
           same in the contracts and notes to be executed
           by the student borrower.  Such authority extends
           to both the federally insured interim notes as
           well as to those interim notes negotiated prior
           to entry into the federal program.

                                      Ve     ruly yours,




                                      Atto   ey General of Texas

Prepared by William J. Craig
Assistant Attorney General




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Hon. Bevington Reed, page 8,   (M-1133)



APPROVED:
OPINION COMMITTEE

Kerns Taylor, Chairman
W. E. Allen, Co-Chairman

Bill Campbell
J. C. Davis
Jack Goodman
Bob Lattimore
Houghton Brownlee

SAMUEL D. MCDANIEL
Staff Legal Assistant

ALFRED WALKER
Executive Assistant

NOLA WHITE
First Assistant




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