Dear Mr. White:
You have requested an opinion from this office concerning the legality of Southern University Laboratory School entering into a prepaid tuition payment plan with City National Bank for parents of its students.
Under this plan, Lab School parents would take out an annual low interest loan of ten (10%) percent from City National, with two (2%) percent of that amount set aside in a selected account in the name of the Southern University Lab School. The two (2%) percent set aside would be used to pay defaulted loans after several attempts are made by the school to secure payment.
There is no state law on point that either authorizes or prohibits this type of arrangement. However, Article 7, Section 14A of the Louisiana Constitution of 1974 prohibits the "loaning, donating or pledging things of value of the state or any political subdivision to or for any person, association, or corporation, public or private."
From your request, it appears that this is merely a private arrangement between lending institutions and borrowers (parents), with a portion of the interest paid by the borrower being dedicated to the repayment of defaulted loans of other participants in this program. It does not appear from your letter that the arrangement with City National would require the expenditure of any public funds or, in fact, involve the Southern University Lab School in any way. Therefore, the above-mentioned constitutional provision would not apply, and the arrangement is thus not prohibited.
Trusting this to be of sufficient information for your purposes, I am
Sincerely,
WILLIAM J. GUSTE, JR. Attorney General
BY: NORMAN W. ERSHLER Assistant Attorney General