NORTH CAROLINA GENERAL ASSEMBLY
1971 SESSION

CHAPTER 392
SENATE BILL 497

AN ACT TO AMEND ARTICLE 23 OF CHAPTER 116 OF THE GENERAL STATUTES RELATING TO THE STATE EDUCATION ASSISTANCE AUTHORITY, TO VEST ADDITIONAL AUTHORITY TO ISSUE REVENUE BONDS AND REVENUE REFUNDING BONDS AND TO AUTHORIZE A PROGRAM FOR GRANTS AND OTHER ASSISTANCE TO RESIDENTS OF THE STATE FOR EDUCATION BEYOND THE HIGH SCHOOL LEVEL.

The General Assembly of North Carolina do enact:

Section 1.  G.S. 116-201 is revised to read as follows:
"§ 116-201.  Purpose and Definitions. — (a) The purpose of this Article is to authorize a system of financial assistance, consisting of grants, loans, work-study or other employment, and other aids, for qualified residents of the State to enable them to obtain an education beyond the high school level by attending public or private educational institutions. The General Assembly has found and hereby declares that it is in the public interest and essential to the welfare and well-being of the inhabitants of the State and to the proper growth and development of the State to foster and provide financial assistance to residents of the State, properly qualified therefor, in order to help them to obtain an education beyond the high school level. The General Assembly has further found that many residents of the State who are fully qualified to enroll in appropriate educational institutions for furthering their education beyond the high school level lack the financial means and are unable, without financial assistance as authorized under this Article, to pay the cost of such education, with a consequent irreparable loss to the State of valuable talents vital to its welfare. The General Assembly has determined that the establishment of a proper system of financial assistance for such objective purpose serves a public purpose and is fully consistent with the long established policy of the State to encourage, promote and assist the education of the people of the State.
(b)	As used in this Article the following terms shall have the following meanings unless the context indicates a contrary intent:
(1)	"Authority" shall mean the State Education Assistance Authority created by this Article or, if the Authority shall be abolished, the board, body, commission or agency succeeding to the principal functions thereof or on whom the powers given by this Article to the Authority shall be conferred by law;
(2)	"bonds" or "revenue bonds" shall mean the bonds authorized to be issued by the Authority under this Article, which may consist of bonds, notes or other debt obligations evidencing an obligation to repay borrowed money and payable solely from revenues and other moneys of the Authority pledged therefor;
(3)	"obligations" or "student obligations" shall mean student loan notes and other debt obligations evidencing loans to students which the Authority may take, acquire, buy, sell, endorse or guarantee under the provisions of this Article, and may include any direct or indirect interest in the whole or any part of any such notes or obligations;
(4)	"eligible institution," with respect to loans shall have the same meaning as such term has in Section 1085 of Title 20 of the United States code;
(5)	"eligible institution," with respect to grants and work-study programs shall include all state supported institutions of higher learning and all institutions organized and administered pursuant to Chapter 115A of the General Statutes and all private institutions as defined in paragraph 6 of this subsection;
(6)	"private institution" shall mean an institution other than a seminary, Bible school, Bible college or similar religious institution in this State that is not owned or operated by the State or by any agency or political subdivision of the State or by any combination thereof, that offers post high school education and is accredited by the Southern Association of Colleges and Schools, or in the case of institutions that are not eligible to be considered for such accreditation, accredited in such categories and by such nationally recognized accrediting agencies as the Authority may designate;
(7)	"student loans" shall mean loans to residents of this State to aid them in pursuing their education beyond the high school level;
(8)	"student" shall mean a resident of the State, in accordance with definitions of residency that may from time to time be prescribed by the North Carolina Board of Higher Education and published in the Residency Manual of said Board, who, under regulations adopted by the Authority, has enrolled or will enroll in an eligible institution and who is making suitable progress in his education in accordance with standards acceptable to the Authority and who has not received a bachelor's degree, or qualified therefor, and is otherwise classified as an undergraduate under such regulations as the Authority may promulgate;
(9)	"act or undertaking" or "acts or undertakings" shall mean bonds of the Authority authorized to be issued under this Article; and
(10)	"bond resolution" or "resolution" when used in relation to the issuance of bonds shall be deemed to mean either any such resolution or any trust agreement securing any bonds."
Sec. 2.  Section 116-206 is revised to read as follows:
"§ 116-206.  Acquisition of Obligations. — With the proceeds of bonds or any other funds of the Authority available therefor, the Authority may acquire from any bank, insurance company or other lending institution, student obligations, or any interest or participation therein in such amount, at such price or prices and upon such terms and conditions as the Authority shall determine to be in the public interest and desirable to carry out the purposes of this Article. The Authority shall take such actions and require the execution of such instruments deemed appropriate by it to permit the recovery, in connection with any such obligations or any interest or participation therein acquired by the Authority, of the amount to which the Authority may be rightfully entitled, and otherwise to enforce and protect its rights and interests thereto."
Sec. 3.  Section 116-209.2 is revised to read as follows:
"§ 116-209.2.  Reserves. — The Authority may provide in any resolution authorizing the issuance of bonds or any trust agreement securing any bonds that proceeds of such bonds may be used to establish reserve accounts in any trustee or banking institution or otherwise as determined by the Authority, for securing such bonds and facilitating the making of student loans and acquiring student obligations, to provide for the payment of interest on such bonds for such period of time as the Authority shall determine, and for such other purposes as will facilitate the issuance of bonds at rates of interest and upon terms deemed reasonable by the Authority and will, in the Authority's judgment, facilitate carrying out the purposes of this Article."
Sec. 4.  Section 116-209.3 is amended by adding at the end thereof the following paragraph:
"In lieu of or in addition to the Loan Fund, the Authority may provide in any resolution authorizing the issuance of bonds or any trust agreement securing such bonds that any other trust funds or accounts may be established as may be deemed necessary or convenient for securing the bonds or for making student loans, acquiring obligations or otherwise carrying out its other powers under this Article, and there may be deposited to the credit of any such fund or account proceeds of bonds or other money available to the Authority for the purposes to be served by such fund or account."
Sec. 5.  The first sentence of Section 116-209.4 is revised to read as follows:
"The Authority is hereby authorized to provide for the issuance, at one time or from time to time, of revenue bonds of the Authority in an aggregate principal amount outstanding at any time of not exceeding fifty million dollars."
Sec. 6.  The fourth sentence of Section 116-209.4 is revised to read as follows:
"The bonds of each issue shall be dated, shall bear interest at such rate or rates, shall mature at such time or times not exceeding 30 years from their date or dates, as may be determined by the Authority, and may be made redeemable before maturity, at the option of the Authority, at such price or prices and under such terms and conditions as may be fixed by the Authority prior to the issuance of the bonds. Prior to the preparation of definitive bonds, the Authority may, under like restrictions, issue interim receipts or temporary bonds, with or without coupons, exchangeable for definitive bonds when such bonds shall have been executed and are available for delivery. The Authority may also provide for the replacement of any bonds which shall become mutilated or shall be destroyed or lost."
Sec. 7.  Section 116-209.4 is amended by adding at the end thereof the following paragraph:
"The Authority is authorized to provide by resolution for the issuance of revenue refunding bonds of the Authority for the purpose of refunding any bonds then outstanding which shall have been issued under the provisions of this Article, including the payment of any redemption premium thereon and any interest accrued or to accrue to the date of redemption of such bonds, and, if deemed advisable by the Authority, for making student loans or acquiring obligations under this Article. The issuance of such revenue refunding bonds, the maturities and other details thereof, the rights of the holders thereof, and the rights, duties and obligations of the Authority in respect to the same shall be governed by the provisions of this Article which relate to the issuance of revenue bonds insofar as such provisions may be appropriate. Revenue refunding bonds issued under this section may be sold or exchanged for outstanding bonds issued under this Article and, if sold, the proceeds thereof may be applied, in addition to any other authorized purposes, to the purchase, redemption or payment of such outstanding bonds."
Sec. 8.  Section 116-209.5 is amended by adding at the end thereof the following paragraphs:
"In the discretion of the Authority, any bonds issued under the provisions of this Article may be secured by a trust agreement by and between the Authority and a corporate trustee, which may be any trust company or bank having powers of a trust company within or without the State. Such trust agreement or the resolution providing for the issuance of such bonds may pledge or assign the fees, penalties, charges, proceeds from collections, grants, subsidies, donations and other funds and revenues to be received therefor. Such trust agreement or resolution providing for the issuance of such bonds may contain such provisions for protecting and enforcing the rights and remedies of the holders of such bonds as may be reasonable and proper and not in violation of law, including covenants setting forth the duties of the Authority in relation to student loans, the acquisition of obligations, insurance, the fees, penalties and other charges to be fixed and collected, the sale or purchase of obligations or any part thereof, or other property, the terms and conditions for the issuance of additional bonds, and the custody, safeguarding and application of all moneys. It shall be lawful for any bank or trust company incorporated under the laws of the State which may act as depositary of the proceeds of bonds, revenues or other money hereunder to furnish such indemnifying bonds or to pledge such securities as may be required by the Authority. Any such trust agreement or resolution may set forth the rights and remedies of the bondholders and of the trustee, and may restrict the individual right of action by bondholders. In addition to the foregoing, any such trust agreement or resolution may contain such other provisions as the Authority may deem reasonable and proper for the security of the bondholders. All expenses incurred in carrying out the provisions of such trust agreement or resolution may be treated as a part of the cost of carrying out the purposes for which such bonds shall be issued.
In addition to all other powers granted to the Authority by this Article, the Authority is hereby authorized to pledge to the payment of the principal of and the interest on any bonds under the provisions of this Article any moneys received or to be received by it under any appropriation made to it by the General Assembly, unless the appropriation is restricted by the General Assembly to specific purposes of the Authority or such pledge is prohibited by the law making such appropriation; provided, however, that nothing herein shall be construed to obligate the General Assembly to make any such appropriation."
Sec. 9.  Section 116-209.8 is amended by adding at the end thereof the following sentence:
"The Authority may provide in any trust agreement securing the bonds that any such rights may be enforced for and on behalf of the holders of bonds by the trustee under such trust agreement."
Sec. 10.  Section 116-209.9 is revised to read as follows:
"§ 116-209.9.  Negotiability of Bonds. — All bonds issued under the provisions of this Article shall have and are hereby declared to have all the qualities and incidents, including negotiability, of investment securities under the uniform commercial code of the State but no provision of such code respecting the filing of a financial statement to perfect a security interest shall be deemed applicable to or necessary for any security interest created in connection with the issuance of any such bonds."
Sec. 11.  Article 23 of Chapter 116 of the General Statutes is amended by adding at the end thereof the following additional sections:
"§ 116-209.16.  Other Powers; Criteria. — The Authority, in addition to all the powers more specifically vested hereunder, shall have all other powers necessary or convenient to carry out and effectuate the purposes and provisions of this Article, including the power to receive, administer and comply with the conditions and requirements respecting any gift, grant or donation of any property or money, any insurance or guarantee of any student loan or student obligations, any loans, advances, contributions, interest subsidies or any other assistance from any federal or State agency or other entity; to pledge or assign any money, charges, fees or other revenues and any proceeds derived by the Authority from any student loans, obligations, sales of property, insurance or other sources; to borrow money and to issue in evidence thereof revenue bonds of the Authority for the purposes of this Article and to issue revenue refunding bonds; to conduct studies and surveys respecting the needs for financial assistance of residents of the State respecting education beyond the high school level.
In carrying out the powers vested and the responsibilities imposed under this Article, the Authority shall be guided by and shall observe the following criteria and requirements, the determination of the Authority as to compliance with such criteria and requirements being final and conclusive:
(a) any student loan, grant or other assistance provided by the Authority to any student shall be necessary to enable the student to pursue his education above the high school level; and
(b) no student loan, grant or other financial assistance shall be provided to any student by the Authority except in conformity with the provisions of this Article and to carry out the purposes hereof.
The Authority shall by rules and regulations prescribe other conditions, criteria and requirements that it shall deem necessary or desirable for providing financial assistance to students under this Article upon a fair and equitable basis, giving due regard to the needs and qualifications of the students and to the purposes of this Article.
"§ 116-209.17.  Establishment of Student Assistance Program. — The Authority is authorized, in addition to all other powers and duties vested or imposed under this Article, to establish and administer a Statewide student assistance program for the purpose of removing, insofar as may be possible, the financial barriers to education beyond the high school level for needy North Carolina undergraduate students at public or private institutions in this State. This objective shall be accomplished through a comprehensive program under which the financial ability of each student and of his family, under standards prescribed by the Authority, is measured against the reasonable costs, as determined by the Authority, of the educational program which the student proposes to pursue. Needs of students for financial assistance shall, to the extent of the availability of funds from federal, State, institutional or other sources, be met through work-study programs, loans, grants and out-of-term employment, or a combination of these forms of assistance. No student shall be eligible to receive benefits under this student assistance program for a total of more than forty-five months of full-time, post-high school level education.
"§ 116-209.18.  Powers of Authority to Administer Student Assistance Program. — In order to accomplish the purposes of this Article the Authority is authorized:
(a)	to receive from the general fund or other sources such sums as the General Assembly may authorize from time to time for such purposes, and to receive from any other donor, public or private, such sums as may be made available, and to cause such sums to be disbursed for the purposes for which they have been provided;
(b)	to establish such criteria as the Authority shall deem necessary or desirable for determining the need of students for grants under this Article, as opposed to other forms of financial assistance, and for deciding who shall receive grants;
(c)	to prescribe the form and to regulate the submission of applications for assistance and to prescribe the procedures for considering and approving such applications;
(d)	to provide for the making of, and to make, grants under this Article under such terms and conditions as the Authority shall deem advisable;
(e)	to encourage educational institutions to increase the resources available for financial assistance; to prescribe such formulas for institutional maintenance of effort as the Authority may determine to be consistent with the purposes of this Article;
(f)	to provide by contract for the administration of all or any portion of the Student Assistance Program by non-profit organizations or corporations, pursuant to regulations and criteria established by the Authority;
(g)	to serve, on designation by the Governor, or as may otherwise be provided by federal law, as the State agency to administer such Statewide programs of student assistance as shall be established from time to time under federal law; and
(h)	to have all other powers and authority necessary to carry out the purposes of the Student Assistance Program, including, without limitation, all the powers given to the Authority by G.S. 116-204 and by other provisions of the General Statutes.
"§ 116-209.19.  Grants to Students. — The Authority is authorized to make grants to students enrolled or to be enrolled in eligible institutions in North Carolina out of such money as from time to time may be appropriated by the State or as may otherwise be available to the Authority for such grants. The Authority, subject to the provisions of this Article and any applicable appropriation act, shall adopt rules, regulations and procedures for determining the needs of the respective students for grants and for the purpose of making such grants. The amount of any grant made by the Authority to any student, whether enrolled or to be enrolled in any private institution or any tax-supported public institution, shall be determined by the Authority upon the basis of substantially similar standards and guides that shall be set forth in the Authority's rules, regulations and procedures; provided, however, that grants made in any fiscal year to students enrolled or to be enrolled in private institutions may be increased to compensate, in whole or in part, for the average annual State appropriated tuition subsidy for such fiscal year, determined as provided herein. The average annual State appropriated subsidy for each fiscal year shall be determined by the Advisory Budget Commission, after consultation with the State Budget Officer, Board of Higher Education and the Authority, for each of the two categories of tax-supported institutions, being (i) institutions, presently 16, that provide education of the collegiate grade and grant baccalaureate degrees and (ii) institutions, such as community colleges and technical institutes created and existing under Chapter 115-A of the General Statutes. The average annual State appropriated subsidy for each of such two categories of institutions shall mean the amount of the total appropriations of the State for the respective fiscal years under the Current Operations Budgets, pursuant to the Executive Budget Act reasonably allocable to undergraduate students enrolled in such institutions exclusive of the Division of Health Affairs of the University of North Carolina and the North Carolina School of the Arts for all institutions in such category, all as shall be determined by the Advisory Budget Commission after consultation as above provided, divided by the budgeted number of North Carolina undergraduate students to be enrolled in such fiscal year.
The Authority in determining the needs of students for grants, may give consideration to, among other factors, the amount of other financial assistance that may be available to such students such as non-repayable awards under the Educational Opportunity Grant Program and Health Professions Education Assistance Act.
"§ 116-209.20.  Public Purpose. — No expenditure of funds under this Article shall be made for any purpose other than a public purpose.
"§ 116-209.21.  Cooperation of the Board of Higher Education. — The Board of Higher Education shall provide the secretariat for the Authority. The Executive Director of the Authority, who shall be its principal Executive Officer, shall be elected by the Board of Directors of the Authority on nomination of the Director of the Board of Higher Education.
"§ 116-209.22.  Constitutional Construction. — The provisions of this Article are severable, and if any of its provisions shall be held unconstitutional by any court of competent jurisdiction, the decision of such court shall not affect or impair any of the remaining provisions.
"§ 116-209.23.  Inconsistent Laws Inapplicable. — Insofar as the provisions of this Article are inconsistent with the provisions of any general or special laws, or parts thereof, the provisions of this Article shall be controlling, except that no provision of this act shall apply to scholarships for children of war veterans as set forth in Article 4 of Chapter 165; as amended."
Sec. 12.  This act shall become effective July 1, 1971.
In the General Assembly read three times and ratified, this the 19th day of May, 1971.