Injunction sought to stop college building plan

JEFFERSON CITY, Mo. (AP) -- The state's student loan authority voted Friday to go ahead with a planned payment toward Gov. Matt Blunt's college building initiative, though a judge has set a Tuesday hearing in a lawsuit seeking to stop it.

Under a new law backed by Blunt, the Missouri Higher Education Loan Authority is to pay $350 million over several years to the state to finance dozens of college construction projects and various entrepreneurial investments.

The law calls for the first payment of $230 million to be made by the end of next week.

But student borrowers, who are challenging the deal in Cole County Circuit Court, have asked for a preliminary injunction blocking the loan agency from transferring money to the state.

Their lawsuit claims the loan agency would be violating its state-mandated mission and its fiduciary duty to students by allowing its money to go to buildings instead of better deals for its borrowers.

Central to their argument is the fact that the student loan agency accumulated the money before a law took effect Aug. 28 specifically allowing its proceeds to go toward college building projects.

The surplus of money indicates that MOHELA charged "unreasonably high fees" to its loan holders, the lawsuit claims. It also asserts that money can be used only to lower students' interest rates and fees, forgive their loans or purchase additional student loans on the secondary market.

Blunt has expressed confidence that his college building plan will withstand the court challenge.

The board of the student loan agency voted 5-1 Friday to direct its staff to transfer the money to the state, as called for under the law, by Sept. 14, said Will Shaffner, the agency's director of business development.

Shaffner said he did not know if that money would be transferred before Tuesday's court hearing or if the student loan agency would wait for the hearing's outcome.

Board member Greg Upchurch, of Manchester, said before Friday's meeting that state law really gives the loan agency no choice -- barring an injunction -- other than to pay the state. But Upchurch also believes that's the right move.

"I think the buildings are terribly run down; I think they need a lot of help," he said.

St. Louis attorney Michael Flannery, who represents the suing student borrowers, said he hopes a judge will grant an injunction before any money is transferred to the state. Pursuing the lawsuit after the fact would still be possible, he said, but it would be like "trying to unscramble the eggs."

"We think it's of the utmost importance the court address that now, before the funds go out and are encumbered or used for building projects," Flannery said.