~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 CoorP. 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 HinsonHazlewood 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 

-5513- 
. I 

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 Opportunity 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 Article 2654g was repealed in its entirety, and 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 contracting 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 controlling, such construction in cases of doubt will generally be 

followed unless clearly wrong. Armco Steel Corp. v. Texas 

-5514- 
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 Construction Act. The construction aids are declared to apply, 

whether or not the statutes are considered ambiguous. Section 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 intended 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." 

-5515- 
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, consistent 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. 

-5516- 
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 provisions 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 construction here applicable is that the statutory grant of such express 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 intended 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 construction in favor of that adopted by the administrative agency, 

to which the Legislature has given the responsibility of supervising 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 

-5517- 
Hon. Bevington Reed, page 6, (M-1133) 

at 20 U.S.C. 421, et seq., 

provides, in part,That 

Subsection (c) of 20 U.S.C. 425 

"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 institution 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. 

-5518- 
. . 

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 administrative 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 

-5519- 
. . . 

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 

-5520-