Audit faults Mo. student loan agency for wasteful spending

JEFFERSON CITY, Mo. -- An audit of Missouri's student loan authority depicts it as flush and loose with cash, rewarding executives with luxury perks and wasting money on buildings, parties and no-bid contracts.

Officials at the Missouri Higher Education Loan Authority acknowledged most of the problems highlighted in the report released Thursday by State Auditor Susan Montee. But they said the troubles were in the past, and the agency has righted itself for the future.

"I know it sounds cliche, but we're committed to transparency and accountability and efficiency, and we are going to take our responsibility seriously," said Raymond Bayer Jr., the loan agency's chief executive officer.

Montee put it more bluntly.

Missouri's loan agency officials amassed huge amounts of wealth while "running under the radar screen" and "then spent a lot of the money on themselves," she said. "I think now that everyone knows about them, the jig is up."

The Missouri Higher Education Loan Authority, which has more than $5 billion in assets, is the latest student lender to come under scrutiny for its practices.

New York Attorney General Andrew Cuomo has launched a national probe of student loan providers and college administrators. He claims there is a pattern of favoritism for lenders who provided kickbacks, trips and other gifts in exchange for steering students their way.

The Missouri audit doesn't allege any kickbacks. But it says the loan agency paid for massages during an annual conference for student financial aid personnel as an enticement to attract customers to its booth.

The Missouri audit comes as the not-for-profit loan authority is undergoing its largest mission change since it was created by a 1981 state law as a means of ensuring access to low-cost student loans for Missouri college students.

Under a new law championed by Gov. Matt Blunt, the loan authority is paying $350 million to the state over the next six years to help finance the construction or renovation of dozens of college buildings around the state.

Montee said the loan agency owes almost $2.3 million for "excessive" severance benefits to four former executives who either resigned or were fired in recent years.