The Honorable Bevington Reed 

Commissioner 

Coordinating Board 

Texas College and University System 

P. 0. Box 12788, Capitol Station 

Austin, Texas 78711 

Opinion No. H; 747 

Re: -Contractual authority of 

the Coordinating Board, Texas 

College and University System, 

with respect to the cancellation 

of educational loans. 

Dear Dr. Reed: 

Section 52.40 of the Texas Education Code was enacted by the ,Legislature 

in 1975. It empowers the Coordinating Board to cancel the repayment of all or 

part of certain student loans from the Texas Opportunity Plan Fund (extended by 

authority of article 3, sections 50b and 50b-1 .of the Texas Constitution) if the 

persons receiving the loans become employed by particular state agencies for 

particular lengths of time. The constitutionality of the measure was considered 

in Attorney General Letter Advisory No. 90( 1975). 

Your letter to us notes that the 64th Legislature appropriated no money to 

the Texas Opportunity Plan Fund to off-set the loss of money borrowers would 

otherwise pay to the Fund if the loans were not cancelled. You are particularly 

concerned about the effect of such cancellations on Texas College Student Loan 

Bonds to be repaid from the Texas Opportunity Plan Fund, and ask if the Board 

may enter contracts to cancel loans in the absence of an effective legislative “offset” appropriation. 

We do not think a legislative “off-set” appropriation is critical. The Constitution itself, in subsection (charticle 3, section 50b, appropriates money in 

these words: 

While any of the bonds, or interest on said bonds 

authorized by this Section is outstanding and unpaid, there is hereby appropriated out of the first 

monies coming into the Treasury in each fiscal 

year, not otherwise appropriated by this Constitution, an amount sufficient to pay the principal and 

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The Honorable Bevington Reed - page two (H-747) 

interest on such bonds that mature or become 

due during such fiscal year, less the amount in 

the sinking fund at the close of the prior fiscal 

year. 

The Constitutional provision does everything that a legislative act could 

do to “off-set” a potential loss of income to the Fund insofar as the protection 

of bondholders is concerned. It automatically appropriates every year the full 

amount necessary for the retirement of bond indebtedness during the year. Cf. 

Lightfoot v. Lane, 140 S. W. 89 (Tex. Sup. 1911); Attorney General Constitutional 

Advisory No. 6( 1974). 

We are, therefore, of the opinion that the Coordinating Board may enter into 

cancellation contracts whether or not a legislative “off-set” appropriation has 

been made. Further, the Board would not be authorized to require. that contract 

terms be in any way dependent upon a legislative “off-set” appropriation because 

in our opinion the statute does not contemplate such a contractual requirement. 

Subsection (c) of section 52.40 of the Texas Education Code mandatorily states: 

The legislature shall appropriate to the Texas 

Opportunity Plan Fund an amount equal to the 

loans and interest cancelled pursuant to the provisions of this section. 

However, the availability to students of loan cancellation contracts. is not made 

contingent on a legislative appropriation. 

You also ask if a cancellation contract may be made between the Board and 

an otherwise eligible borrower whose beginning repayment date has been delayed 

until after September 1, 1975, the effective date of section 52.40. The beginning 

repayment date for student loans may fall after September 1 either because the 

student’s original loan repayment obligation begins after that date or because the 

beginning repayment date has been extended by the Board (pursuant to section 

52. 38 of the Texas Education Code) due to unusual financial hardship, military 

service, Peace Corps service, or other special circumstance. 

Section 52. 40 reads, in pertinent part: 

(a) The board may cancel the repayment of a 

loan received by a’ student who earns [certain 

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The Honorable Bevington Reed - page three (H-747) 

P rofessional degrees] and who is employed by 

certain state agencies] prior to the date on 

which repayment of the loan is to commence. 

The statute expressly sets up only two eligibility criteria: (1) the student 

borrower must have earned one of the professional degrees named, and (2) 

he must be employed by one of the named agencies prior to the date on which 

repayment of the loan is to commence. In our opinion there is no express or 

implied requirement in section 52.40 that would negate the authority of the Board 

found in section 52. 38 of the Education Code, to exercise discretion in extending 

beginning repayment dates. See 53 Tex. Jur. 2d, Statutes 5 185. We believe the 

two sections should be read together and we answer the question in the affirmative: cancellation contracts may be made with such persons if they are otherwise eligible. 

SUMMARY 

The Coordinating Board, Texas College and 

University System, may enter into student 

loan cancellation contracts pursuant to section 

52.40, Texas Education Code, even in the 

absence of legislative “off-set” appropriations, 

and may not contractually make cancellations 

dependent upon them. Student borrowers if 

otherwise eligible are eligible for cancellation 

contracts if the beginning repayment dates of 

their loan are subsequent to September 1, 1975. 

Very truly yours, 

Attorney General of Texas 

Opinion Committee 

jad: 

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