Sallie Mae's potential buyers gave the nation's largest student lender until Tuesday to consider their reduced buyout offer in light of what they said was "the new economic and legislative environment that faces the company."

But despite that pitch, Sallie Mae (SLM) reiterated Monday that it isn't interested in the lower price.

In the latest development in a months-long dispute over what could be one of the world's largest private-equity takeovers, the lender filed a lawsuit to force the buyers to go through with their original $25 billion deal or else pay a $900 million breakup fee.

The buyers group, led by private equity firm J.C. Flowers & Co. and including Bank of America Corp. (BAC) and JPMorgan Chase (JPM), has said student loan legislation signed into law by President Bush last month, and weaker economic conditions, makes the $60-a-share price agreed upon in April unacceptable.

The group sent a revised offer of $50 per share to the board of the company, formally called SLM Corp., last week. It planned to walk away if Sallie Mae didn't accept the new offer, worth about $21 billion, by Tuesday.

Sallie Mae responded last week with a terse statement, saying it expected the buyers to honor the original contract.

But the company went further Monday by filing the lawsuit in Delaware Chancery Court. It seeks a declaration that the buyers violated the merger agreement, and that Sallie Mae should get the $900 million breakup fee because no "material adverse effect" has occurred that would allow the buyers to walk away from the deal.

"We regret bringing this suit," Sallie Mae Chairman Albert L. Lord said in a statement late Monday. "Sallie Mae has honored its obligations under the merger agreement. We ask only that the buyer group do the same. We are prepared to close under the contract the parties signed in April."

J.C. Flowers spokeswoman Stephanie Cutter responded: "The lawsuit filed by Sallie Mae rests on a fundamental misunderstanding of the terms of our contract, and is without merit. This is a dispute that should be resolved in the board room, not the court room."

Sallie Mae said it notified the buyer group Wednesday that all conditions to closing the deal had been satisfied, and Nov. 5 had been set as the closing date.

But Sallie Mae received a letter from the buyers group Monday disputing that, in part because the buyers claim there have been significant unfavorable changes to Sallie Mae's business.

The new student loan law cuts about $20 billion in federal subsidies to companies like Sallie Mae that make student loans, while halving the interest rate on government-backed student loans.

Sallie Mae says the new student loan law will reduce its net income between 1.8 percent and 2.1 percent each year over the next five years.

The buyers group forecasts a cut in profits of 14.4 percent in 2009 and 20.1 percent in 2012.

Reston, Va.-based Sallie Mae has maintained that the group was already on notice about the new law, and the anticipated reduction in earnings isn't a valid reason for the buyers to back out of the deal.

The rancor comes as the once-booming private-equity industry stumbles amid tightened credit markets, which have caused investors to balk at financing big deals.

Buyout firms like J.C. Flowers — which acquire public companies and restructure them to sell them at a profit — had enjoyed a wave of easy credit but recently have found it harder to persuade their bankers to finance takeovers.

In July, Cerberus Capital Management LP had to inject more equity into its takeover of Chrysler Group from DaimlerChrysler AG.

More recently, The Home Depot Inc. lowered the sale price on its wholesale supply unit by 17 percent to complete its sale to private-equity firms. And two firms backed out of their $8 billion buyout of upscale audio equipment maker Harman International Industries Inc.