Suit seeks to block MOHELA

Two student loan holders have filed a lawsuit with the help of a Jackson lawyer to block Gov. Matt Blunt's plan to finance college construction projects by taking $350 million from the state's student loan authority.

The lawsuit against the Missouri Higher Education Loan Authority and its officials 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 Aug. 28.

The 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.

"We are asking for injunctive relief which would prohibit the defendants from diverting and giving away this money," Lichtenegger said Friday.

The suit accuses MOHELA executives and members of an "illegal scheme" to divert MOHELA assets and asks for unspecified damages, including punitive damages. MOHELA's board of directors has no legal right to spend the loan money for campus construction, Lichtenegger said. "Obviously, this isn't their money," he said. "They are holding these funds in trust for the students of Missouri."

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 graduate 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.

"Those interest rates should be brought down for those students and they shouldn't be in perpetual bondage on college loans," Lichtenegger said.

He also worries that the spending plan could lead state officials to siphon off more money from MOHELA for future spending plans.

MOHELA was created under a 1981 state law to help ensure college students have access to loans.

The nine-count lawsuit contends that the Blunt spending plan amounts to a diversion of money accumulated over the past 26 years. The money should have gone to Missouri students in the form of lower interest rates and loan forgiveness programs, the plaintiffs allege.

Lichtenegger and other lawyers for the plaintiffs want the circuit judge to certify the case as a class-action lawsuit, clearing the way for other student loan holders to join the litigation.

"I have four or five women in our office who have now or had in the past MOHELA loans," he said. They would be eligible to join the suit as plaintiffs if the case becomes a class-action suit, he said.

Southeast Missouri State University president Dr. Ken Dobbins said the lawsuit could hold up $24 million in state funding for construction projects at the school. That includes $17.2 million for the River Campus arts school and $2.6 million for an autism center.

The River Campus is almost done. It's scheduled to open for classes Aug. 20.

The university borrowed money through the issuance of bonds to finance the construction of the River Campus. Without the state funding, Dobbins said, Southeast by next year would have to raise student fees to retire the bonds.

Construction of the autism center won't proceed without state funding, he said.

Dobbins said he hopes the case can be heard, appealed and decided by the Missouri Supreme Court by this fall.

Lichtenegger said he isn't opposed to the state funding campus construction and that the projects could still be done if lawmakers appropriated money from the estimated $320 million state surplus.

Dobbins, however, said such a move is unlikely.

State Sen. Jason Crowell, R-Cape Girardeau, said state government needs a surplus.

"Just because you have the money doesn't mean you need to spend the money," he said.

mbliss@semissourian.com

335-6611, extension 123