Sallie Mae announced today that the banks and private-equity firms that last spring agreed to pay $25-billion to buy out the student-loan giant had decided to renege on the deal. They are apparently contending that legislation passed this month by Congress will so drastically reshape the student-loan industry — and sharply cut its profits — that the company is no longer worth the purchase price.

In a written statement, Sallie Mae said that it “firmly believes that the buyer group has no contractual basis to repudiate its obligations under the merger agreement and intends to pursue all remedies available to it to the fullest extent permitted by law.”

The move by the buyer group — which includes J.C. Flowers & Company, of New York, and Friedman Fleischer & Lowe, of San Francisco, as well as Bank of America and JPMorgan Chase — came one day before President Bush is scheduled to sign into law the legislation, which would slash lender subsidies by almost $21-billion. —Andrew Mytelka