An Act To Provide Affordable Loans for Higher Education
Maine Legislature, Session 121, LD 1625
Committee: Business and Economic Development
Sponsors: DAGGETT, COLWELL, BROMLEY, TREAT, RICHARDSON, SULLIVAN
Amends: 10 MRSA §969-A

Legislative Document 
No. 1625 
S.P.579 
In Senate, May 28, 2003 
An Act To Provide Affordable Loans for Higher Education 
Reference to the Committee on Business and Economic Development suggested and 
ordered printed. 
JOY J. O'BRIEN 
Secretary of the Senate 
Presented by President DAGGETT of Kennebec. (GOVERNOR'S BILL) 
Cosponsored by Speaker COLWELL of Gardiner and 
Senators: BROMLEY of Cumberland, TREAT of Kennebec, Representatives: RICHARDSON 
of Brunswick, SULLIVAN of Biddeford. 
Printed on recycled paper 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 10 MRSA §969-A, sub-§14-C is enacted to read: 
14-C. 
Student 10an secondary market. 
Take all actions 
necessary to implement and administer a student loan secondary 
market: 
Sec. 2. 20-A MRSA c. 417-F is enacted to read: 
CHAPTER 417 -F 
HIGHER EDUCATION LOAN PURCHASE PROGRAM 
§11491. 
Purpose: program established 
The Legislature finds and declares that the provision of 
higher 
education 
for 
all 
residents 
of 
this 
State 
and 
for 
nonresidents attending institutions of higher education wi thin 
this State who desire higher education and are properly qualified 
is important to the welfare 
and security of this State and 
consequently is an important public purpose. 
Many qualified 
students are deterred by financial considerations from completing 
tbeir education, with a consequent irreparable loss to the State 
of talents vital to the welfare of the State and its citizens. 
Accordingly, 
there is established the 
Higher 
Education 
Loan 
Purchase 
Program 
to 
provide greater 
access 
to 
federal 
loan 
program loans at a lower cost enabling students in this State to 
attend the institutions of higher education of their choice. 
§1l492. 
Definitions 
As 
used 
in this 
chapter, 
unless 
the 
context 
otherwise 
indicates, the following terms have the following meanings. 
1. 
Authority. "Authority" means the Finance Authority of 
Maine established in Title 10, section 961 and its successors or 
assigns. 
2. 
Bonds. "Bonds" includes bonds, notes, commercial paper, 
pass-through instruments or any other evidences of indebtedness 
the authority issues under this chapter. 
3. 
Borrower. "Borrower" means a person who is obligated as 
a borrower to make payment of an eligible loan. 
4. 
E1igib1e 1ender. "Eligible lender" means the authority 
and 
the Federal 
Government 
and 
any financial institution or 
institution of higher education that is an eligible lender under 
the federal Higher Education Act of 1965, Public Law 89-329, 79 
Stat. 1219, Title IV, as amended, or under the federal Health 
Professions 
Educational 
Assistance 
Act 
of 
1976, 
Public 
Law 
484, 
Stat. 2243, 
as amended, 
as applicable or, in each 
case, any successor provision, that is approved by the authority 
for participation in the program. 
5. 
Eligible loan or loan. "Eligible loan" or "loan" means a 
loan originated under the federal Higher Education Act of 1965, 
Public Law 89-329, 79 Stat. 1219. Title IV, as amended, or under 
the federal 
Health Professions Educational Assistance Act of 
1976, Public Law 94-484, 90 Stat. 2243, as amended, in each case 
along with any successor provision, by an eligible lender to a 
borrower. or under any student loan program administered by the 
authority. 
6. 
Finance. 
"Finance" means the acquisition or refinancing 
of eligible loans, including loans to eligible lenders to make 
such loans. 
7. 
Program. 
"Program" 
means 
the Higher Education Loan 
Purchase Program established by this chapter. 
§11493. 
Higher Education Loan Purchase Program 
1. 
Program. 
The authority is authorized to carry out the 
program by issuing bonds for the purpose of financing eligible 
loans and may use any net earnings on those bonds to administer 
the program, 
to payor further secure the bonds and to make 
eligible loans. 
2. 
Rules. 
The authority shall adopt rules to implement and 
administer 
the 
program. 
All rules 
adopted pursuant to this 
subsection are routine technical rules as defined in Title 5, 
chapter 375, subchapter 2-A. 
§11494. 
Records confidential 
1. 
Confidential 
information. 
Records 
containing 
any 
information acquired by the authority or a member, employee or 
agent of the authority from borrowers whose loans are financed by 
the authority are confidential for purposes of Title 1, section 
402, subsection 3, paragraph A. 
2. 
Wrongful disclosure prohibited. 
A member, 
employee. 
agent, other representative of the authority or other person may 
not knowingly divulge or disclose records declared confidential 
by 
this 
section, 
except 
that 
the 
authority 
may, 
in 
its 
discretion, make or authorize any disclosure of information of 
the following types: 
A. 
Impersonal, statistical or general information; 
B. 
Information to an eligible lender or credit reporting 
service; 
C. 
Information necessary to comply with the federal Higher 
Education Act of 1965, Public Law 89-329, 
Stat. 1219, 
Title IV, 
as 
amended, 
or the federal Health Professions 
Educational Assistance Act of 1976, Public Law 94-484, 
Stat. 
2243, 
as 
amended, 
in 
each 
case 
along 
with 
any 
successor provision, or any administrative requirements of 
the Federal Government or any guarantee agency under the 
Federal Government or of any federal or state law or rule or 
with any agreement pertaining to financial assistance; 
D. 
Information, 
the disclosure 
of 
which 
the 
authority 
determines 
is 
necessary 
or 
convenient 
to 
the 
sale 
or 
transfer of its bonds; 
E. 
Information 
necessary 
to 
ensure 
collection 
of 
any 
obligation in which 
the 
authority has 
or 
may 
have 
an 
interest; 
F. 
In any litigation or proceeding in which the authority 
has appeared, any information obtained from records declared 
confidential by this section; and 
G. 
Information required pursuant to a subpoena, request for 
production of documents, warrant or other order by competent 
authority, 
provided that any such order appears to have 
first 
been 
served 
on 
the 
person 
to 
whom 
confidential 
information sought pertains or belongs and provided that any 
such order appears on its face or otherwise to have been 
issued or made upon lawful authority. 
§11495. 
Bonds 
1. 
Issuance: 
purpose: 
payment: 
authorization: 
interim 
receipts or certificates. 
The authority may issue bonds for the 
purposes 
of 
this 
chapter, 
including, 
without 
limitation, 
financing eligible loans, which may include consolidation loans 
funding the payment of eligible loans to borrowers of eligible 
loans financed by the authority, 
financing loans to eligible 
lenders to fund the origination of eligible loans and acquiring 
existing portfolios of eligible loans from eligible lenders. 
The 
bonds of each issue must be authorized by the authority and be 
payable only from such sources specified in 
the agreement with 
bondholders, which may include, without limitation, payments on 
or with respect to eligible loans from any source, including sale 
proceeds; reserves established by the authority for the bonds; 
payments 
pursuant 
to 
agreements 
with financial 
institutions, 
educational institutions or 
any governmental entity: 
payments 
p\}.rsuant 
to 
interest 
rate 
exchange 
agreements: 
investment 
earnings from funds or accounts maintained pursuant to a trust 
agreement or other document; proceeds of refunding bonds; 
and 
other fees, charges or revenues of the authority. 
Bonds issued by the authority for the purposes of this chapter, 
the resolution authorizing the issuance of such bonds or any 
trust agreement authorized for the issuance of such bonds may 
include such provisions, which must be part of the contract with 
the holders of the bonds of such issue and with any 3rd-party 
credit or liquidity provider or counterparties to interest rate 
exchange agreements, 
as 
the authority considers necessary or 
convenient to the security or issuance of the bonds, including 
without limitation: 
A. 
Specifying the payment terms of bonds, 
including the 
basis upon which interest accrues on those bonds, which may 
be fixed, variable, auction-based or adjustable; the payment 
of principal at maturity or redemption; a date or dates, and 
a maturity at a time or times, whether as serial bonds or as 
term 
bonds, 
or 
both, 
determined 
by 
the 
authority; 
the 
denominations 
and 
form, 
which 
may 
include 
coupon, 
registered, coupon and registered or book entry; and such 
privileges 
as 
to conversion and for 
the 
replacement of 
mutilated, lost or destroyed bonds as the authority may 
establish; 
B. 
Providing that bonds be payable in lawful money of the 
United States at a designated place or be payable in another 
form of currency if the authority so designates 
and be 
considered to be negotiable instruments issued under the 
laws of the State within the meaning and for all purposes of 
Title 11, 
Article 
3-A, 
whether 
or not of 
the 
form 
or 
character to so qualify under the terms of Title 11, Article 
3-A, SUbject only to the applicable provisions of any trust 
agreement; 
C. 
Providing that bonds 
be executed by the manual 
or 
facsimile signatures of the officers or designees of the 
authority; 
~_ Providing that bonds be sold in the manner and upon the 
terms determined by the authority at public or private sale, 
with or without public bidding; 
E. 
Pledging or assigning revenues, contractual rights and 
other assets to secure the bonds; 
F. 
Establ ishing 
loan 
funding 
deposits, 
debt 
service 
reserves. capitalized interest accounts, 
cost of issuance 
accounts 
and sinking funds 
and other accounts 
and their 
regulation. investment and disposition: 
G. 
Providing for 
the 
issuance of additional 
bonds 
and 
refunding 
bonds: 
H. 
Defining the acts or omissions that constitute a default 
in 
the 
duties 
of 
the 
authority of its obligations 
to 
bondholders and providing the rights or remedies of such 
bondholders in the event of a default: 
I. 
Providing for guarantees , letters of credit, lines of 
credi t, 
insurance 
policies , 
surety 
bonds. 
purchase 
agreements or similar instruments or other security for the 
benefit of the bondholders: 
J. 
Providing for interest rate or exchange agreements; and 
K. 
Any 
other 
matter 
relating 
to 
the 
bonds 
that 
the 
authority determines appropriate. 
2. 
Credit not pledged. 
Bonds issued under this chapter do 
not constitute or create any debt or liability on behalf of the 
State 
or 
of 
any political subdivision of the State or 
the 
authority. a loan of the credit of the State or a pledge of the 
faith and credit of the State or of any political subdivision of 
the State or the authority, but are payable solely from the funds 
provided for those bonds. 
All the bonds must contain a statement 
to the effect that the State, any political subdivision of the 
State or the authority is not obligated to pay the bonds or the 
interest on the bonds, except from funds provided for those bonds 
pursuant to one or more agreements, and that neither the faith 
and credit nor the taxing power of the State or of any political 
subdivision of 
the State is pledged to 
the 
payment 
of 
the 
principal of, premium, if any, or the interest on such bonds. 
The issuance of bonds under this chapter does not directly or 
indirectly or contingently obligate the State or any political 
subdivision of the State to 
levy or to pledge 
any 
form of 
taxation whatever or to make any appropriation for the bonds' 
payment. 
3. 
Liability of members. 
A member or employee of the 
authority or any person executing the bonds may not be held 
liable personally 
on 
the 
bonds 
or 
subject 
to 
any 
personal 
liability by reason of the issuance of the bonds. 
4. 
Interest rate exchange agreements. 
In connection with, 
or incidental to, the issuance or carrying of bonds issued under 
this chapter or carrying of any investment. the authority may 
enter 
into 
agreements 
with 
financial 
institutions 
that 
the 
authority determines to be necessary or appropriate to place the 
obligation or investment of the authority, in whole or in parL 
on the interest rate, cash flow or other basis as determined by 
the authority. 
5. 
Purchasing, refunding or refinancing by authority. 
The 
authority may purchase its bonds out of any available funds and 
may hold, pledge, cancel or resell the bonds subject to and in 
accordance with agreements with bondholders. 
The authority may 
refund or refinance any of its bonds. 
6. 
Conclusive authorization. 
All bonds of the authority 
must be conclusively presumed to be fully authorized and issued 
under the laws of the State, and any person or governmental unit 
is estopped from questioning their authorization, sale, issuance, 
execution or delivery by the authority. 
§11496. 
Trust agreement; pledge of security 
1. 
Trust agreement. 
Any bonds issued under this chapter 
may be secured by a trust agreement by and between any or all of 
the following: 
the authority, 
a 
financial institution and 
a 
corporate trustee or trustees, which may be any trust company or 
bank having the powers of a trust company within or without the 
State. 
2. 
Pledge of security. 
This subsection governs a pledge of 
security pursuant to this chapter. 
A. 
All moneys received by the authority or received on 
behalf of the authority by any eligible lender, servicer, 
trustee, 
custodian or collection agent, 
pursuant to 
any 
resolution, 
trust 
agreement 
or 
any 
other 
agreement 
authorized 
by 
this 
chapter 
and 
pledged 
pursuant 
to 
a 
resolution, 
trust 
agreement 
or 
other 
agreement 
for 
the 
benefit of the bondholders, whether as proceeds from the 
sale of bonds or as revenues, are deemed to be trust funds 
to 
be 
held 
and 
applied 
solely 
as 
provided 
in 
such 
resolution, trust agreement or other agreement. 
Subject to 
the provisions of any such resolution, trust agreement or 
other agreement, 
any such money may be invested in such 
investments and investment agreements as may be approved by 
resolution of the authority. 
Any servicer, custodian or 
collection agent with which such money is deposited is 
deemed to hold such money in trust for the benefit of the 
authority or the bondholders 
and shall apply such money 
solely for the purposes of this chapter, subject to such 
restrictions as 
this chapter, 
the applicable authorizing 
resolution, trust agreement or other agreement may provide. 
B. 
Any pledge made by the authority of income, revenues or 
other property is valid and binding from the time the pledge 
is made. 
The income, revenue or other property so pledged 
and 
received after 
being 
pledged 
by 
the 
authority, 
or 
received on behalf of the authority by any eligible lender, 
servicer, trustee, custodian or collection agent, pursuant 
to any resolution, trust agreement or other agreement that 
is authorized by this chapter and pledged pursuant to a 
resolution, 
trust 
agreement 
or 
other 
agreement 
for 
the 
benefit of the bondholders, is immediately subject to the 
lien of such pledge without any physical delivery thereof or 
further act, and the lien of any such pledge is valid and 
binding as against all parties having claims of any kind in 
tort, contract or otherwise against the authority, or such 
other recipient on behalf of the authority, irrespective of 
whether 
such 
parties 
have 
notice 
of 
that 
lien. 
Notwithstanding 
any 
other 
provision 
of 
law, 
neither 
possession nor the filing of any financing or continuation 
statement is necessary with respect to any such income, 
revenues or other property to establish or evidence the lien 
of 
any 
such pledge, 
including the creation, 
perfection, 
priority or enforcement of such lien, with respect thereto. 
A resolution authorizing bonds, a trust agreement or other 
agreement described in this section or any other instrument 
by which such 
a 
pledge is created does 
not need to be 
recorded. 
§11497. 
Loan transactions 
The authority may finance, sell, service, pledge, invest in, 
hold, trade, accept as collateral or otherwise deal in, acquire 
or transfer, all on such terms and conditions as the authority 
may specify, 
any eligible loan or portfolio of loans or loan 
pass-through certificate pledge, 
including any pledge of loan 
revenue, loan participation certificate or other loan-backed or 
loan-related security. 
Any such transaction may be conducted by 
public or private offering. 
In connection with the financing or 
sale 
of 
an 
eligible 
loan 
or 
of 
a 
beneficial 
interest 
or 
participation in an eligible loan or portfolio of eligible loans, 
the authority may enter into one or more agreements providing for 
the origination, guarantee, financing, purchase, sale, servicing, 
custody, 
control and administration of 
such eligible loan or 
portfolio of eligible loans. 
Any such agreement may provide that 
the authority, any other eligible lender, a financial institution 
or other person may act as trustor, trustee or custodian under 
the agreement. 
Any such agreement may provide that, with respect 
to loans governed by the agreement, title to a loan, or to a 
beneficial interest or participation in a loan, is deemed to have 
been transferred on terms and to the extent specified in that 
agreement and that the effect of a sale of a beneficial interest 
or participation in a loan is the same as a sale of a loan. 
The 
authority may issue or cause to be issued certificates or other 
instruments evidencing the holder's fractional interest in a pool 
of loans, which interest may be undivided or limited to one or 
more 
specific 
loans. 
Whether 
or 
not 
the 
certificates 
or 
instruments are of such form or character as to be negotiable 
instruments under Title 11, Article 3-A, 
the certificates or 
instruments are made negotiable instruments within the meaning of 
and for all purposes of Title 11, Article 3-A, subject only to 
such registration requirements as the authority may establish. 
§11498. 
Tax exemption 
Bonds issued under this chapter constitute a proper public 
purpose and the securities, their transfer and the income from 
them, including any profits made on their sale, are at all times 
exempt 
from taxation within the State, 
whether or not those 
securities, their transfer or the income from them, including any 
profits made on their sale, are subject to federal taxation. 
§11499. 
Bonds as legal investments 
Bonds 
issued 
by 
the 
authority 
under 
this 
chapter 
are 
securities in which all public officers and public bodies of the 
State and its political subdivisions; 
insurance companies 
and 
associations and other persons carrying on an insurance business; 
trust companies, 
banks, 
bankers, 
banking associations, 
savings 
banks 
and 
savings 
associations, 
including 
savings 
and 
loan 
associations; financial institutions; credit unions; building and 
loan 
associations; 
investment 
companies; 
executors, 
administrators, 
trustees 
and 
other 
fiduciaries; 
pension, 
retirement funds and profit-sharing; other persons carrying on a 
banking business; and all other persons may properly and legally 
invest funds, including capital in their control or belonging to 
them. 
These bonds are made securities that may properly and 
legally be deposited with and received by any state, municipal or 
public officer or any agency or political subdivision of the 
State for any purpose for which the deposit of bonds or other 
obligations of the State is now or may hereafter be authorized by 
law. 
§11499-A. 
Taxable bond option 
With respect to all or any portion of any issue of any bonds 
or any series of bonds that the authority may issue in accordance 
with 
the 
limitations 
and 
restrictions 
of 
this 
chapter, 
the 
authority may covenant, elect and consent that the interest on 
the bonds be includable under the federal Internal Revenue Code 
or 
any subsequent corresponding internal 
revenue 
law of the 
United States in the gross income of the holders of the bonds to 
the same extent and in the same manner that the interest on 
bills. bonds. notes or other obligations of the United States is 
includable in the gross income of the holders under the federal 
Internal 
Revenue 
Code 
or 
any 
subsequent 
law. 
Bonds 
issued 
pursuant to this section are not subject to any limitations or 
restrictions of any law that may limit the authority's power to 
issue those bonds. 
The grant of power in this section may not be 
construed as limiting -the inherent power of the State or its 
agencies under any other provision of law to issue debt. 
the 
interest on which is includable in the gross 
income of the 
holders under the federal Internal Revenue Code or any subsequent 
law. 
§11499-B. 
Agreement of the State 
The State pledges to and agrees with the holders of any 
bonds issued under this chapter and with those parties who may 
enter into any contract with the authority pursuant to this 
chapter that the State will not limit. alter. restrict or impair 
the rights vested by this chapter in the authority until the 
bonds issued pursuant to this chapter. together with interest, 
including interest on any unpaid installment of interest and all 
costs and expenses in connection with any actions or proceedings 
by or on behalf of the 
bondholders. are fully met and discharged 
and 
such contracts 
are fully performed 
on 
the part of 
the 
authority. 
Nothing in this chapter precludes that limitation or 
alteration if and when adequate provision is made by law for the 
protection of the holders of such bonds and of those parties 
entering into contracts with the authority. 
The authority is 
authorized to include this pledge and undertaking for the State 
in those bonds or contracts. 
§11499-C. 
Chapter cumulative; no notice required 
This 
chapter 
may 
not 
be 
construed as 
a 
restriction or 
limitation upon any powers that the authority might otherwise 
have under any laws of this State and this chapter is cumulative 
of any such powers. 
Neither the making of contracts nor the 
issuance of bonds pursuant to this chapter need comply with the 
requirements of any other state law applicable to the making of 
contracts. the issuance of bonds or the construction. acquisition 
or 
management 
of 
any 
project 
undertaken 
pursuant 
to 
this 
chapter. 
No proceedings. notice or approval is required for the 
issuance of any bonds or any instrument as security for those 
bonds. except as is provided in this chapter or in the federal 
Internal Revenue Code. if applicable. 
§11499-D. 
Chapter liberally construed 
This chapter being necessary for the welfare of the State 
and its inhabitants must be liberally construed so as to effect 
its purposes. 
SUMMARY 
This bill creates the Higher Education Loan Purchase Program 
to 
be 
administered by 
the 
Finance Authority of 
Maine 
as 
a 
secondary market 
for higher education loans, 
as provided in 
Public Law 2003, chapter 112, allowing the Governor to designate 
a state agency as a secondary market, and Executive Order 16 FY 
02/03, dated May 14, 2003, designating the Finance Authority of 
Maine as the state secondary market for educational loans. 
The bill adds the administration of a secondary market for 
student 
loans 
to the general powers 
of 
the authority. 
The 
authority is authorized to issue tax exempt bonds to finance 
certain loans.