Sallie Mae has upped the ante in its dispute with the buyers’ group that has called off its $25-billion merger agreement with the student-loan giant. The company announced today that it had filed a lawsuit in a state court in Delaware seeking, among other things, a declaration that the buyers have repudiated the contract and that Sallie Mae may now terminate the agreement and collect damages of $900-million.

The takeover price, set in April, amounts to $60 a share. But the buyers’ group, which is led by the private-equity firm J.C. Flowers & Company and also includes JPMorgan Chase and Bank of America, has argued that the price should be lower because Congress recently cut federal subsidies to student-loan providers more deeply than had been expected. That action, the Flowers group says, constitutes a “material adverse effect” that gives it the right to break the contract.

But Sallie Mae asserts in its lawsuit that no material adverse effect has occurred. Its chairman, Albert L. Lord, said in a written statement that “Sallie Mae has honored its obligations under the merger agreement. We ask only that the buyer group do the same.” —Charles Huckabee