As Students Return to College, Student Loan Fraudsters Rejoice

source http://seminal.firedoglake.com/diary/65482/

photo: Avolore via Flickr

Just in time for the big "back to college" weekend . . . From the Chronicle of Higher Education comes this news about Nelnet, one of the largest private student loan companies and a favorite of Nebraska Senator Ben Nelson:

Nelnet will pay $55-million to settle its share of a whistle-blower lawsuit that accuses it and several other lenders of defrauding taxpayers of more than a billion dollars in student-loan subsidies.

The settlement, which Nelnet announced late Friday, is the latest to result from a lawsuit brought by Jon H. Oberg, a former Education Department researcher, on behalf of the federal government.

My.

$55 million to settle a $1+ billion fraud case? Talk about pennies on the dollar. It's just the cost of doing business, I suppose.

But I wonder why Nelnet announced this late on a Friday afternoon? Aren't they proud of their accomplishment?

The settlement comes seven years after Mr. Oberg discovered that Nelnet and several other lenders were exploiting a loophole in a program that guaranteed a 9.5-percent return on certain loans. Mr. Oberg reported his discovery to his supervisors, but he says he was brushed off and told to work on other things.

The overpayments continued until the Education Department announced, in January 2007, that it would stop paying lenders at the highest subsidy rate until they could prove that they qualified for it. The following month, the department announced that Nelnet would be allowed to keep $278-million in overpayments but would lose out on an estimated $882-million in future federal subsidies.

Shorter Bush Dept of Ed: "OK, we caught you stealing. You can keep the money, but don't let us catch you at it again."

*sigh*

The Bush administration is the gift that keeps on giving.

Fortunately, this is a kind of black swan event. I mean, no one seriously thinks that the insurance companies would do something like this under the new health insurance reforms, or the MOTUs on Wall Street would do anything like this with FinReg, or . . .

*sigh*

Welcome back to school, everyone.