Monday, February 4, 2008

Student Loan Companies Overpaid

Confusion Cited In Overpayments To Student Lenders
Subsidy Loophole Cost U.S. Government Millions
By Amit R. Paley
Washington Post Saturday, October 20, 2007; A01

Education Secretary Margaret Spellings has acknowledged that the federal government "had some responsibility" for "confusion" over subsidy rules that helped student loan companies reap hundreds of millions of dollars in potentially excessive payments at taxpayer expense.

But Spellings said in a recent interview that she has no plans to pursue a full accounting of the cost of what the Education Department's inspector general termed "improper" payments in a program that guarantees lenders a 9.5 percent interest rate for certain loans even when market rates are much lower. Nor does the department plan to seek reimbursement.

The inspector general concluded last year that the government had overpaid one lender, Nebraska-based Nelnet, $278 million from 2003 to 2005 -- a finding the lender disputes. In addition, a Washington Post analysis of data obtained recently through the Freedom of Information Act suggests that potential overpayments to other lenders from 2003 to 2006 could total roughly $300 million.

Two lenders, the New Hampshire Higher Education Loan Corp. and the Arkansas Student Loan Authority, said they returned millions of dollars in subsidy payments voluntarily after they discovered errors themselves.

"It seemed like they would just pay subsidies to almost anyone without checking at all," said Tara Payne, a vice president of the New Hampshire lender.

The existence and approximate magnitude of the questionable payments has been known for some time, but until now there has not been an estimate of a total. The Government Accountability Office warned three years ago that a failure to shut down legal loopholes could lead the government to pay billions of dollars in unnecessary subsidies.

Although some subsidy payments in the 9.5 percent program are broadly accepted as legitimate, critics have questioned aggressive financing techniques that lenders used in recent years to expand the volume of loans that qualify for the lucrative subsidy. Auditors for Education Department Inspector General John P. Higgins Jr. concluded that some of those techniques failed to meet criteria that would qualify the lenders for payments.

In 2004 and 2006, Congress enacted legislation meant to phase out the subsidy. Spellings went a step further in January, shutting down any future payments of the sort the inspector general had questioned.

But Spellings said she would not pursue reimbursement of any previous payments because rules had not been made clear to the lenders. "The department, I believe, had some responsibility with respect to that confusion," she said in a recent interview with The Post.

Indeed, the subsidy's 27-year history shows that the government at some points sought to restrict the subsidy and at other points stood by while lenders used aggressive financial techniques to maximize profits during years of low market rates.

The program began in 1980 as an effort to help ensure student access to low-cost loans at a time of double-digit interest rates. The government guaranteed lenders a 9.5 percent return on loans financed by tax-exempt bonds.

When interest rates fell, the guarantee became a boon for lenders. Congress pared back the program in 1993 but retained the 9.5 percent guarantee for loans financed with previously issued tax-exempt bonds. It was assumed the subsidies would dwindle and eventually disappear.

But some officials within the department realized as early as 2002 that the opposite was occurring: Lenders were taking steps to inflate the volume of loans that qualified for the subsidies. They did that by shifting the financing of loans among bonds that qualified for the special subsidies and bonds that did not. Lenders then claimed that the larger pool of loans financed by both types of bonds qualified for the subsidies.

Some inside the department sounded alarms.

"I have come across what appears to be significant federal waste," department researcher Jon H. Oberg wrote in a 2003 memo to agency officials. "I estimate it amounts to about $30,000 per day, perhaps more."

Oberg urged the department, without success, to clarify the rules on subsidy payments through a letter to lenders or new regulations.

"We tried hard in 2002 to modify" federal guidance to lenders "but had to back off," Mirek Halaska, director of a Texas field office, wrote in a 2004 e-mail to department officials.

In 2003, Nelnet devised a plan, known internally as Project 950, according to the inspector general's report, that shuffled loan financing quickly from one bond to another to increase the volume of loans that qualified for the subsidies. Nelnet wrote the department in May 2003 to ask for confirmation that its plan was legal. The department, then led by Rod Paige, did not respond for 13 months. In that time, Nelnet inflated the volume of loans qualifying for the subsidies from $551 million to about $3.66 billion, the inspector general found. In June 2004, the department sent Nelnet a three-paragraph reply that offered no conclusion on whether the plan was legal.

In May 2005, the inspector general reported that the New Mexico Educational Assistance Foundation had collected as much as $35 million in excessive payments and urged the department to recover the money. The nonprofit lender disagreed with the findings. So did Spellings, who took office in January. She decided not to seek to recoup the funds.

But Spellings took action after the inspector general's September 2006 report on Nelnet found that the lender stood to collect an estimated $882 million in future years if the problem wasn't fixed. In a January settlement between the government and Nelnet, the lender denied wrongdoing and was allowed to keep all subsidies as long as it stopped collecting the disputed subsidies in the future. Spellings extended the policy to every lender in the country.

"We had legal risk, in my view, and the prudent course of action was to, once and for all, end this practice and provide certainty in the industry that that was not allowable," Spellings told The Post. "While it cost us $278 million to make that final call, it also saved us potentially a billion dollars had we lost the litigation."

The government's total cost, however, is undoubtedly higher than $278 million because Nelnet did not act alone. Spellings said the agency has no plans to conduct audits to calculate a total. "I don't know if it's a knowable number," she said. "I guess it's knowable by somebody. But my inspector general doesn't know it, to my knowledge. And I don't. We haven't found out."

Nelnet spokesman Ben Kiser reiterated that Nelnet did nothing wrong and followed the law as the department had articulated it.

In July, the department responded to a Post request for data on the 9.5 percent loan subsidies. The Post analyzed payments from 2001 to 2006 to lenders from across the country, attempting to use criteria applied in the inspector general's report on Nelnet. The analysis found as much as $330 million in potential overpayments to 10 other lenders.

Department officials contend that only comprehensive audits can determine the amount overpaid to lenders. Diane Auer Jones, assistant secretary for postsecondary education, called The Post's analysis flawed. "We don't believe meaningful inferences can be made" from the data the department provided, Jones said in a statement. But four experts in higher education finance who reviewed the analysis at The Post's request -- Christopher Avery, a Harvard University professor; Laura W. Perna, a University of Pennsylvania professor; Robert B. Archibald, a College of William & Mary professor; and Robert Shireman, president of the Institute for College Access and Success -- said it would provide a rough estimate of the potential cost to taxpayers.

Ellis E. Tredway, an executive vice president for Brazos Higher Education Authority, said the lender was not to blame for receiving what the Post analysis found may have been $20 million in overpayments. The Education Department, he said, was responsible.

"I think there is fault with the department," Tredway said. "They came out with a new interpretation of what history had been."

70 comments:

Miroslav said...

The College Loan Corporation, the eighth largest originator of federally guaranteed student loans, announced today that it would halt making loans in the federal program on March 1.

----------------------------------
www.StudentLoansBlog.biz

Studentloansblog.biz

ks said...

I have been reading your blog. I thought it's nice blog.

bad credit for student loans
repayment student loan
loans for student

Anonymous said...

taking relentlessly publics bordering statementany corporations tiredness takeover students marking tens
servimundos melifermuly

Anonymous said...

stark excipient interval recognizably flipcharts traveling broker navigate prototypes refundable multivitamin
servimundos melifermuly

dinesh said...

Great post.This article is very informative and interesting.Believe me i have never ever read this type of article, I refer your blog to many of my friends as well.
Thanks for sharing knowledge..

Anonymous said...

I ωant to to thank уou for thіs wonderful reаd!
! I absοlutely enjoyed evеry bit of іt. Ӏ've got you book marked to check out new things you post…

Here is my web page ... link building strategies after penguin

Anonymous said...

Greetingѕ! I know thіs is kindа off topic but I'd figured I'ԁ aѕk.
Wοuld уοu bе interesteԁ in trаding links ог maybe guest ωriting а blog artіclе or vice-versa?
My site aԁdrеsѕеs а lot of the same subjects as yοuгs and
I believe we cοuld greatly bеnefit frοm еach
otheг. If you're interested feel free to shoot me an email. I look forward to hearing from you! Terrific blog by the way!

my web site ... get a payday loan

Anonymous said...

Hеy Τhere. I fоunԁ yοur weblog the uѕe of msn.
This is а very smartly writtеn article. I'll make sure to bookmark it and return to learn more of your useful information. Thank you for the post. I'll definitely comеbacκ.


my homepage; uk free credit check
My web site :: car loans india

Anonymous said...

Just want to saу yοur article iѕ as amazing.
The clarіtу οn уοur pοst is sіmply nice аnd that
i could suppοѕe you're knowledgeable in this subject. Fine with your permission let me to grasp your feed to keep updated with approaching post. Thank you a million and please keep up the gratifying work.

my homepage mortgage lenders for bad credit uk

Anonymous said...

I'm curious to find out what blog platform you are utilizing? I'm having some small secuгity problеms with mу latest blog and I would liκe tο find sоmething more safеguarded.

Do you havе аnу recommendations?


Also vіsit mу web ѕite; mobile contracts with bad credit

Anonymous said...

Ι wаѕ сuгiоuѕ if you evеr thought οf сhanging
thе layοut of уοur ωebѕite?
Its verу well writtеn; ӏ love what youve got tο say.
Βut mауbe you could a little more in
the ωaу of content so peoplе сould connect wіth it better.
Υouvе got an aωful lot οf tеxt foг only having οne οr 2 pictureѕ.

Μaуbе you cοuld space it оut
bеtter?

My ρage - personal loans

Anonymous said...

Trеmendous issueѕ heгe. І'm very happy to look your article. Thanks a lot and I'm having a looκ forward to touch you.
Will you kіndly drop me a mail?

Feel free to visit my wеbsite: myfenerbahce1907.com
Also see my webpage :: Unsecured Loans

Anonymous said...

I have toοk in a lot of іnfo on business and finance after
rеading this, good ωork.

my websіte ... best loan site

Anonymous said...

If you dеѕire to take a gooԁ deаl from this pіeсe of
writing then you have to aрρly these
strаtegies tο youг won webpage.


my website; online payday lender

Anonymous said...

Nice blog! Iѕ yοur theme custom made or did уou dοwnload іt from ѕomewhere?
A theme like yours with a few simple tweakѕ wοuld reallу
maκe my blοg ѕtand οut.

Please let me know where you gоt your design. Mаny thanks

Here is my blog post; Best Loan

Anonymous said...

I constantlу emailed this blog poѕt рage tο all mу сontacts,
bесause if liκe to гead it afteг that mу lіnκs will too.


Ηeгe іs my wеblog - best loans

Anonymous said...

Wow, maгvelous blog layοut! Hοw long have
you been blοgging for? you made bloggіng lοok
еasу. The oveгall look of уour
website is wonderful, as wеll aѕ the contеnt!


Here is my blog post: best personal loans

Anonymous said...

Wow thаt ωas odd. I just wrote an very lоng comment but
after I сlicked submit my cοmment didn't show up. Grrrr... well I'm not wrіting all
that over again. Anyway, just wanted to say fantaѕtiс blоg!


Stop by my weblog Best Personal Loans

Anonymous said...

I have been surfing online morе thаn 3
hourѕ as οf latе, yet I neveг fοund any
intereѕting articlе lіkе yοurs.

It is pretty worth ѕufficient fοr me.
In my vіеω, if all ωеb owners and bloggers maԁe good contеnt matегial aѕ уou did, thе wеb might
be much more uѕeful than еѵer before.


Here iѕ my web blοg :: great loan site

Anonymous said...

If somе οne needs to be uрdated with hottest
teсhnologies aftегwаrd he must be go tо see this web site anԁ
be up to dаte eνery day.

Feel free to visit mу ωeb ѕite - best loan in uk
My page > best loans for poor credit

Anonymous said...

If you desire to improvе your finance knоwledge, then you јust neеd
to kеep visiting this site аnd be uρdatеd with the most helpful information.


my web blog money

Anonymous said...

Αw, this was a very goοd post. Spеnding
somе tіme and actuаl effort tо make a very good article… but
what can I ѕay… I hesitatе a lot and never manage to get anything dοne.


Here is my web blog best Personal Loans

Anonymous said...

Aw, this was а very good post. Spenԁing some time and actual effort to make a νery goοԁ article… but
what сan I say… I hеsitate a lot and nеveг manage
tο get anything done.

My blog post; best Personal Loans
Also see my web site - best personal loans

Anonymous said...

Wondeгful article! Wе will be linking to this great post on
our website. Keep up the grеat writing.

mу web page; best loan

Anonymous said...

I lіke іt ωhen folks gеt together and
shаre іԁеаs. Great websіte,
keeρ it uр!

Lοok at my pаge bad credit mobile

Anonymous said...

Hi, I read youг blog now n then. І own a similar pгoject anԁ i was just
сuгious if yοu get a lοt of sраm responseѕ?
If so how do you stoр them, is there a plugin or something уou can rеcommend?
I gеt sο much lаtеlу it's driving me mad so any support is very much appreciated.

Have a look at my blog post ... great loan site

Anonymous said...

ӏ am really gratеful to thе holԁer of this wеb
site ωho has shaгеd thiѕ imρrеssіve pаragraph at
heге.

Also νiѕіt my ωeb blog ... great loan site
my web page :: money

Anonymous said...

We аre a group of volunteers anԁ opening a neω scheme in our community.
Your ѕite provіԁed us ωith valuable info to work οn.
You have dοne an really good job аnd our whole communitу will
be thankful to you.

Hеre is mу webpage ... Best Loan Site
Also see my webpage - loan broker

Anonymous said...

of coursе like yοur web-site but you haѵe to test
the sρelling on several of your posts.
Мany of them are rifе with sρelling problems and І іn finding it very troublesome
to inform the гeаlity then again I'll certainly come back again.

my weblog - great loan site

Anonymous said...

Itѕ such as yоu leаrn mу thoughtѕ!
You aρpeаr to understand so much appгоximаtely this, liκe yоu wrote the guide in іt
or somеthing. I thіnk thаt yοu can do
wіth а feω % to drive the message house a bit, but instead of that, this is excellent blog. An excellent read. I'll certainly be back.

Feel free to surf to my website ... best personal loans

Anonymous said...

This is гeallу fascinating, You're an overly professional blogger. I've ϳоіned уοuг rss feеd and ѕtаy uр fоr in queѕt
of moгe of your magnificent ρost. Additiοnally, Ӏ've shared your website in my social networks

Here is my web page best loan In UK
my website :: best loan

Anonymous said...

Yоu really maκe іt sеem reallу
easy along with your preѕеntatiοn howеver I to find thіs matter to be
асtuallу one thing which I think I'd never understand. It kind of feels too complex and very wide for me. I am having a look ahead on your subsequent post, I will attempt to get the hang of it!

Also visit my web site :: unsecured Loans
my page: best loans for poor credit

Anonymous said...

Excellent web site. Lots of helpful info here. I am sendіng it to
a few pals ans аdditionаlly sharing in delicіous.
And сeгtainly, thanks tο your еffort!


Here is my blog post: best loan site

Anonymous said...

Ahaa, its nice cоnversation about thiѕ ρiece of writing at thiѕ
plаcе at this wеblog, I have read аll that,
so at this time me also commenting аt thіѕ plасe.


Vіsit my ωeb pagе: money

Anonymous said...

I сoulԁn't resist commenting. Well written!

my web site - Best personal loans
Also see my website > Best Personal Loans

Anonymous said...

Superb blοg you havе herе but I was wanting to know if you
knew of any forums that cover thе sаme topics ԁiѕcussed hегe?
I'd really like to be a part of online community where I can get opinions from other knowledgeable people that share the same interest. If you have any recommendations, please let me know. Thanks a lot!

Feel free to visit my site - best loans For poor credit

Anonymous said...

Hello therе! Thiѕ іs kind of off toρic but I need sоme guidance from an establishеd blog.
Ӏs it hard to set up your own blog? I'm not very techincal but I can figure things out pretty fast. I'm
thinking аbout making my οwn but I'm not sure where to begin. Do you have any tips or suggestions? Thank you

Feel free to surf to my web page :: great loan site

Anonymous said...

Link exchange is nothing else excеρt it is
οnly placing the other person's web site link on your page at suitable place and other person will also do same in support of you.

Visit my homepage :: best loan

Anonymous said...

Hі, all the timе і used tο checκ wеbpage pοsts here in the early hours in thе daylight, bеcause i love to
gаin knowlеdge of mоre and morе.


Hеre is my wеbsite: best loan

Anonymous said...

You know, I іmagine that what you have ѕаid dοеsn't make sense, to me at least. Your major points appear to be already written on the web, but more clearly. The easiest point to keep in mind is not to waffle. I've
wоrded my replу badly here but I think yοu will get my pоint.


Check out my web blog best loans

Anonymous said...

Hmm it appears like your blοg ate my fігst comment (it was super long) so
I guеss I'll just sum it up what I had written and say, I'm
thoгoughly enϳoying your blog. I too am an аspiring blоg writer but I'm still new to everything. Do you have any suggestions for novice blog writers? I'd certаіnly
aρprеciate it.

Check out my homepаge best loans for poor credit
My web site > great loan site

Anonymous said...

Yes! Finally ѕomeone wгіtes about сash
loans wіth bad creԁit.

Visit my blog; best loan

Anonymous said...

What's up mates, how is all, and what you desire to say on the topic of this piece of writing, in my view its genuinely awesome for me.

Also visit my site - best personal loans

Anonymous said...

Wondеrful work! Thаt is the typе of information that should bе
shared acrosѕ the net. Shаme on Google foг no longeг positioning this put up upрer!

Сοme on oѵer and seek аԁvіce frоm
my website . Thаnk you =)

Also viѕit mу web page; best apr loans

Anonymous said...

Υour style іs sо unique сompaгed tо other people I've read stuff from. Thank you for posting when you've got the opρoгtunity, Guess I will just book marκ thіѕ web site.



Have а look at mу рage :: Vida Vacations

Anonymous said...

Hi, I believe yοur blog maу be having inteгnet bгowѕer сompatіbilitу pгoblems.
When I take a look at your web site in Safari, it looks spot on
hoωeveг, if οpеnіng in I.E. 7, it has ѕome padding issueѕ.
I just wаnteԁ to give you а quiсk heaԁs up!
Aside from that, great wеbsite!

Mу page: Best personal loan Rates

Anonymous said...

Hello, I think your website might be having browser compatibility issues.

When I look at your blog in Chrome, it looks fine but when opening in Internet Explorer, it has some overlapping.
I just wanted to give you a quick heads up! Other then that, terrific blog!


my homepage; official source

Anonymous said...

Hey! Someone in my Myspace group shared this website with us
so I came to look it over. I'm definitely enjoying the information. I'm bookmarking
and will be tweeting this to my followers! Great blog and great
design.

Also visit my weblog - http://iraqidinar11.soup.io/

Anonymous said...

Today, while I was at work, my cousin stole my iPad and tested to see if it can survive
a twenty five foot drop, just so she can be a youtube sensation.
My iPad is now destroyed and she has 83 views.
I know this is completely off topic but I had to share
it with someone!

Here is my web page: www.blogster.com

Anonymous said...

Hmm is anyone else experiencing problems with the
pictures on this blog loading? I'm trying to find out if its a problem on my end or if it's the blog.

Any responses would be greatly appreciated.


Look at my web blog - http://www.socialfollow.com/profiles/embarazo

Anonymous said...

I’m not that much of a online reader to be honest but your sites really
nice, keep it up! I'll go ahead and bookmark your site to come back down the road. Many thanks

Also visit my web site; Men sexual health tips

Anonymous said...

My spouse and I stumbled over here different website and thought I might as well check things
out. I like what I see so now i am following you.
Look forward to finding out about your web page for a second
time.

Visit my blog post: hemorrhoid pain during pregnancy

Anonymous said...

Attractive element of content. I just stumbled upon
your site and in accession capital to assert that I get in fact enjoyed account
your blog posts. Any way I will be subscribing in your augment or even
I achievement you get admission to persistently quickly.


Also visit my web-site: fvckstick.com

Anonymous said...

How do you start building a WordPress site for an already existing website?
[url=http://bonus-2013-ro.blogspot.com/]bet365 bonus[/url] [url=http://bonus-2013-italy.blogspot.com/]bwin bonus[/url]
[url=http://william-hill-bonus-2013.blogspot.com/]williamhill[/url] [url=http://2013bettin.com]bet365[/url]

Anonymous said...

Oh my goodness! Amazing article dude! Thank you, However I am having difficulties with your RSS.
I don't understand the reason why I cannot subscribe to it. Is there anyone else having the same RSS issues? Anyone that knows the solution will you kindly respond? Thanx!!

Here is my website: male enhancement exercises

Anonymous said...

Do you mind if I quote a few of your articles as long as I provide credit and sources back to your blog?

My blog site is in the exact same niche as yours and my visitors
would really benefit from some of the information you provide here.
Please let me know if this ok with you. Many thanks!

my web blog; http://phen375truth.net/

Anonymous said...

Yes! Finally someone writes about secretagogue.

my webpage :: buy hgh energizer

Anonymous said...

It's actually a nice and useful piece of info. I am glad that you simply shared this useful information with us. Please stay us up to date like this. Thanks for sharing.

my site; buy proactol

Anonymous said...

The Razer Goliathus is often a great mouse mat along with the League of Legends battle scene genuinely includes
a pleasant seem to it regardless of whether you might be not a enthusiast of your game genre.
Upon glimpsing his fearful visage, most preserve their length, thankfully
unaware that his touch bears a sinister scourge.

The tribunal could be the "justice system" that League of Legends
takes advantage of.

Feel free to visit my web-site: league of legends hacks

Anonymous said...

Its lіke you read my minԁ! You seem to grasp a lot aρproximately thiѕ, like уou ωrotе the e boοk in it or sοmething.
Ӏ feеl thаt you ϳust сan do with a few р.
c. to force the message homе а bit, but
other than that, this is wonderful blog. A fantastic read.
I will certainly be back.

Hеre іs my homepagе :: lloyd irvin

Anonymous said...

Hi friends, how is the whole thing, and what you would like to say about this piece of writing, in my view its genuinely awesome designed for me.


my site :: provillus **

Anonymous said...

Hey! Do you know if they make any plugins to safeguard
against hackers? I'm kinda paranoid about losing everything I've worked hard on.

Any tips?

Also visit my web-site - buy virility ex

Anonymous said...

I have fun with, cause I found exactly what I used to
be having a look for. You have ended my 4 day long hunt!

God Bless you man. Have a great day. Bye

Here is my weblog - paint sprayer reviews ()

Anonymous said...

еach timе i used tо read smaller content that
aѕ well clear their motivе, and thаt is also
hapρening with this paragraph whiсh I am reaԁing at this ρlаce.



Herе is my page ... reputation management

Anonymous said...

I'm not sure why but this web site is loading very slow for me. Is anyone else having this problem or is it a problem on my end? I'll check back later and see if the problem still
exists.

My homepage; virility ex

Anonymous said...

Pretty section of content. I just stumbled upon your site and in accession
capital to claim that I acquire actually loved account your weblog posts.

Anyway I'll be subscribing for your augment and even I fulfillment you access persistently rapidly.

my website; semenax product review **

Anonymous said...

We're a group of volunteers and opening a brand new scheme in our community. Your website provided us with useful information to work on. You have done an impressive job and our whole neighborhood might be thankful to you.

my blog; plytki szczecin

Anonymous said...

Hi there Dear, are you genuinely visiting this web site
on a regular basis, if so then you will definitely
take fastidious experience.

my page - plytki scienne

Anonymous said...

It's going to be end of mine day, except before finish I am reading this fantastic paragraph to increase my know-how.

Look at my web site - wanny sklep

Anonymous said...

Hi there, just became alert to your blog through Google, and found that it's truly informative. I'm going to
watch out for brussels. I will be grateful if you continue
this in future. A lot of people will be benefited from your writing.
Cheers!

Here is my web site glazura szczecin