Two student loan holders have filed a lawsuit seeking 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 financial duty to students by allowing its money to be used for campus construction rather than lower loan rates for its borrowers.
The suit, filed Thursday in Cole County Circuit Court, seeks an injunction barring the loan agency and its board of directors from funding the building plan and declaring it illegal. A law authorizing the deal is scheduled to take effect on 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. The agency has stockpiled the money.
Jackson lawyer John Lichtenegger, a former curator for the University of Missouri, is one of the attorneys representing plaintiffs Michael McGennis and Aaron Izadi-Moghadam of Columbia.
MOHELA's board of directors has no legal right to spend the loan money for campus construction, he said. "Obviously, this isn't their money," he said. "They are holding these funds in trust for the students of Missouri," Lichtenegger said.
Gov. Matt Blunt had lauded the conversion of student loan profits into brick and mortar as part of "a historic higher education plan."
Lichtenegger said college students in Missouri are burdened with expensive debt. Many students graduate from college with $40,000 in debt and have to pay it off at 9 or 10 percent interest annually for 10 or 15 years, he said.
"It is a huge, huge issue for students," said Lichtenegger.