JEFFERSON CITY, Mo. (AP) -- A lawsuit by student loan holders seeks to block Gov. Matt Blunt's $350 million plan to finance college construction projects by taking money from the state's student loan authority.
The lawsuit against the Missouri Higher Education Loan Authority claims the agency is violating both its state-mandated mission and its fiduciary duty to students by allowing its money to go buildings instead of better deals for its borrowers.
The lawsuit asks a Cole County judge to issue an injunction barring the loan agency and its board of directors from financing the building plan and to declare it illegal. A law authorizing the deal is set to take effect Aug. 28.
The loan agency has sold off hundreds of millions of dollars worth of loans made to non-Missourians in anticipation of transferring money to the state. So far, it has just been stockpiling that money.
Blunt has lauded the conversion of student loan profits into bricks and mortar as part of "a historic higher education plan" that also expands student scholarships and imposes limits on university tuition increases. The lawsuit does not challenge tuition caps or scholarships, which are to be funded with general state tax revenues.
It describes the building plan as an "improper raid on the MOHELA coffers in an illegal and misguided scheme to shift funds to a program that is contrary to the fundamental purposes for which MOHELA was originally constituted."
The agency was created under a 1981 state law to help ensure college students have access to loans. A bill signed into law this year by Blunt would expand its mission to include the financing of the building projects.
But the lawsuit says that amounts to a diversion of money, accumulated over the past 26 years, that should have gone to Missouri students in the form of lower interest rates and loan forgiveness programs.
The plaintiffs in the lawsuit, which seeks class-action status, are MOHELA borrowers Michael McGennis and Aaron Izadi-Moghadam, both of Columbia. Among the attorneys filing the lawsuit on their behalf is John Lichtenegger, a former curator for the University of Missouri.