Washington — The secretary of education, Margaret Spellings, has repeatedly defended her decision to let the National Education Loan Network, or Nelnet, a major for-profit student-loan provider based in Nebraska, keep some $300-million in disputed federal student-loan subsidies. But as others, including members of Congress, fight for Nelnet to repay the money, they may have a previously unknown ally.
In an award that attracted little notice at the time, the Education Department’s Office of Inspector General was presented in October with the Alexander Hamilton Award, the top federal award for an inspector general — for its work in the Nelnet case.
The inspector general reported in September 2006 that Nelnet had received an estimated $278-million in improper subsidies through a program that Congress intended to let expire — a figure later revised upward to $322-million — and suggested that Nelnet be required to repay the entire amount.
Secretary Spellings, however, after reviewing the matter, announced last January that Nelnet, and other lenders that had received higher-rate subsidies through the same program but on a smaller scale, would be allowed to keep the money, as long as they stopped billing for such subsidies in the future. The decision led to protests from members of Congress, who are demanding a full repayment.
The award to the department’s Office of Inspector General was presented by the President’s Council on Integrity and Efficiency and the Executive Council on Integrity and Efficiency, both of which are headed by Clay Johnson III, a former classmate, roommate, and fraternity brother of President Bush at Phillips Academy and Yale University. Mr. Johnson is also a deputy director of the White House’s Office of Management and Budget.
“Given this recognition from the White House, perhaps the secretary will reconsider her earlier position regarding Nelnet” and the other lenders, said Thomas Culligan, a spokesman for Rep. Thomas E. Petri, a Wisconsin Republican and former vice chairman of the House education committee. —Paul Basken
