Lawsuit against college building plan dropped

JEFFERSON CITY, Mo. -- A lawsuit seeking to stop Missouri's student loan agency from supplying money to Gov. Matt Blunt's college construction plan has been dropped.

A Cole County judge had denied a request in September to temporarily bar the Missouri Higher Education Loan Authority from paying the first installment of Blunt's $350 million plan. Although the initial request failed, the lawsuit had continued.

But court records show the case was dismissed last week at the request of those who had sued. No reason was given.

Attorneys for the plaintiffs did not immediately return telephone calls Tuesday.

Blunt praised the dismissal as a victory for students, whom he said will benefit from state-of-the-art buildings funded under his plan.

"The dismissal of this bogus lawsuit shows once against that we are taking the right approach with our landmark partnership," Blunt said in a written statement.

The not-for-profit loan authority was created under a 1981 state law to help ensure college students have access to loans. Blunt first proposed in January 2006 to sell off loan agency assets as a way to finance college buildings, scholarships and professors.

His plan underwent numerous revisions before legislators this May passed a bill that requires the loan authority to pay $350 million to the state over the next six years, the vast majority of which is to go to college buildings. The new law specifically expanded the mission of the loan authority to include financing the building projects.

Before the law took effect Aug. 28, two student loan recipients seeking class action status sued MOHELA and asked a judge to prevent it from transferring money to the state.

The lawsuit claimed the money, accumulated over the past 26 years, should instead have gone to Missouri students in the form of lower interest rates and loan forgiveness programs. It claimed some students were paying unreasonably high interest rates on their loans.

During a Sept. 11 hearing, Cole County Circuit Judge Richard Callahan refused to issue a temporary restraining order. He decided the plaintiffs hadn't shown there was a reasonable likelihood they could later win on the merits of their case.

The judge also said the lawsuit seemed to try to limit the legislature's power to use public money, which he described as a "novel theory."

Callahan's ruling cleared the loan agency to make its first payment to state -- of $230 million -- by Sept. 15, as required by the law. So far, the state has distributed about $62 million of that to colleges, universities and the Missouri Technology Corp., which finances projects linking university research and businesses.

Although the plaintiffs asked for the lawsuit to be dismissed, they are not precluded from filing a new lawsuit.