Attorney General Mike McGrath likely will have to decide whether the Legislative Auditor's Office has the legal authority to conduct a performance audit on two Montana student loan entities that maintain they are private -- not public -- agencies.

On Tuesday, the Montana Board of Regents voted 5-2 to request a performance audit on the Montana Higher Education Student Assistance Corp. and the Student Assistance Foundation. Regent Todd Buchanan, a Billings stockbroker, made the motion for the audit, saying he was frustrated about not getting information he wanted from the two student loan groups.

Tori Hunthausen, chief deputy legislative auditor, said Wednesday the Legislative Auditor's Office had not yet received a formal request for the audit from the university system. Commissioner of Higher Education Sheila Stearns said she will submit the audit request later this week on behalf of the regents.

When the Legislative Auditor's Office receives her request, Hunthausen said the auditor's office will ask Stearns to formally request an attorney general's opinion on whether legislative auditors can legally conduct a performance audit on MHESAC and SAF.

Attorney-general opinions carry the force of law unless overturned by a court.

The 2007 Legislature effectively killed House Bill 578, by Rep. John Musgrove, D-Havre, that, among other things, would have required that the legislative auditor have full access to the financial records to MHESAC and SAF. That bill was tabled in a House committee.

"We do believe an attorney general's opinion is required because the Legislature has already said no on HB578," Hunthausen said.

In addition, Hunthausen said a Department of Administration official had sought a Governmental Accounting Standards Board Interpretation on whether MHESAC should be part of the state financial audit work done by the Legislative Auditor's Office. The board ruled it shouldn't be included.

MHESAC and SAF also have separate legal opinions from Dorsey & Whitney, a national law firm based in Minneapolis, contending they are private, not public, entities.

However, a number of the members of the Board of Regents and Stearns' staff sit on the MHESAC and SAF boards.

Stearns said she will send a letter to the Legislative Auditor's Office, based on the minutes of Tuesday's conference call, conveying the regents' request. She said she would talk to the regents' chair and vice chair to make sure her letter conveys "the letter and spirit of the resolution."

She said she would offer to work with the auditor "in terms of clarifying the real specifics of the request."

Once the Legislative Auditor's Office asks her to seek an attorney general's opinion, Stearns said, "I would certainly at that point consult with the regents again."

"It's a complex topic and everyone will do the best they can to follow the law and do what's appropriate," Stearns said.

Buchanan's resolution came after some turmoil in the Montana student industry.

Last week, SAF, which does loan servicing, laid off 23 members of its staff and quit consolidating loans for students.

Although MHESAC has $175 million in financing in place for loans to Montana students in the 2008-2009 school year, the availability of money in future years is up in the air. MHESAC is caught up in the national credit and liquidity crunch, and its auctions for nearly all of its $1.3 billion in auction bond notes previously issued by MHESAC have failed since Feb. 11. MHESAC is trying restructure its finances.

Some national help may on its way from the federal government for the student loan industry.

On Wednesday, the U.S. Senate on Wednesday passed its version of a bill approved earlier by the House to authorize the U.S. secretary of education to buy federally guaranteed loans from private lenders, a move that supporters believe would increase liquidity in the market.

This proposal would affect the Federal Family Education Loan Program or FFELP. President Bush has indicated he wants to see similar legislation passed.