Washington
Sallie Mae overbilled the Education Department for $22.3-million in student-loan subsidies and should be required to return the money to the department, the agency's inspector general wrote in an audit report issued on Monday.
According to the audit, the overcharges occurred from October 2003 to September 2006. Sallie Mae, the nation's largest provider of student loans, is disputing the finding.
At issue are payments the Education Department makes to lenders that hold student loans financed with tax-exempt bonds.
In the 1980s, Congress guaranteed nonprofit lenders a 9.5-percent return on such loans to help protect them at a time when the economy was sour and the cost of making student loans was soaring. Congress eliminated that guarantee in 1993 but grandfathered in loans made with bonds issued before that date.
Most nonprofit lenders, along with some large for-profit loan companies that had purchased nonprofit agencies, maintained until recently, however, that government regulations allowed them to continue to receive the 9.5-percent return if they used the returns on loans backed by the bonds to make new loans, a practice known as recycling.
The department suspended all payments at the 9.5-percent rate more than two years ago, saying it would pay the higher rate only if the lenders could prove, via an audit, that they qualified for it. Since then 15 lenders have performed audits, and at least seven have been approved for the higher rate.
In its response to the the inspector general's audit report, Sallie Mae said it was eligible for the 9.5-percent subsidy rate because some of the bonds used to make the loans did not mature until 2005.
The Sallie Mae audit comes just over two months after the inspector general released an audit finding that the Kentucky Higher Education Student Loan Corporation overbilled the department by at least $9-million.
Other lenders have faced similar audits. In 2005 the inspector general accused the New Mexico Educational Assistance Foundation of overcharging the government by as much as $36-million. In 2006 it found that Nelnet had improperly received $278-million in subsidies. And in 2007 it found that the Pennsylvania Higher Education Assistance Agency had received at least $33-million in excess subsidies. In the end, only the Pennsylvania agency was ordered to return any of the money.
Comments
1. kerrykind - August 04, 2009 at 10:46 am
The IG office are sharks who target a school or agency and decide you are going to be guilty before the audit. The audit is perfunctory, because they already have their number in mind. The DOE may or may not enforce the findings---that part is hugely political.
2. atana09 - August 04, 2009 at 11:53 am
Perhap's its well past time for the USDOE to pull out its long hidden teeth and bite some of these sharks back. There has been a constant spate of scheming, and stealing by certain of these educational lenders and despite the repeated exposes, and the loss of millions (and possibly bilions) of taxpayers funds very little is done. In just the cases mentioned in M. Field's article the losses via these corporate thefts, have come to about 380 million. All of which could have been monies provided to colleges and students via such programs as Pells, or collegiate support grants. So these lending corporations steal on, again and again, and in the long term its the students, families, and the middle class which ultimately take the hits for the orgasmic bliss these corporations seem to get from their looting the publics coffers. Quite true there are sharks here, but certain of these educational lenders are rabid and raging sharks. And they seem to be perversely proud of that status, the collections subsidiary for one of the largest of these lenders, actually flaunted a shark tank at their main office. Arrogant and very indicative of how they view their clientele, the public and perhaps even the government which keeps feeding cash into their never satiated maws. In other businesses, a constant defrauding of the government, or the extreme abuses of clients for which certain educational lenders are renowned, would result in serious fines, and possible criminal action for fraud, conspiracy, and statutory theft. Or at least a loss of business, but the edudebt companies have existed in a special place, pillowed in influence peddling bought by billions of dollars of other peoples money. Perhaps its time for the USDOE IG, and the US AG to show these sharks that others also have teeth, and upon further very warrented investigation charge the CEO's and the boards of these companies for the felonious conduct which is ultimately behind their looting of the common treasury. It may be politically motivated, but guess what so was the sweetheart deals, and incestuous relations with certain members of congress, which has allowed these companies to steal, steal, steal and never face the music. Which is insufferable, because the poor clientele of these companies, by the millions, constantly face the music due to the legendary abuses of these companies. And all the students and middle and working class families have done, was make the mistake of getting an education and thus often getting into a debt for which there is no way out. But at the same time, the CEO's of these companies are allowed to steal millions (and over the years it may have been billions), and they have not yet been brought to account. Perhaps an serious investigation, and proper convictions would give some of these men a chance to realize what having no options really means...
3. 11132507 - August 04, 2009 at 01:28 pm
Does news like this surprise anyone anymore? And there are still people who claim that Direct Lending costs taxpayers more money? This article alone mentions nearly $400M in loophole-laden corporate welfare (and that's just for that one single loophole, not counting the zillions in other subsidies)...where is the equivalent of those expenditures courtesy of taxpayers in the Direct Loan program, DL Haters?
4. atana09 - August 04, 2009 at 09:56 pm
It's incredibly unfortunate it doesn't surprise anymore, but many do not know what is going on in the student lending arena. Chronicle and others do a quite good job in these exposes, but these are specialist media. And often the people in the general media who should be following their leads, don't. The other reason some are not aware of the problems, is that the CEO's responsible for the schemes, have kept themselves out of the public eye. It may be a effective tactic, to deny reformers symbols to rally about. But to some degree it is also a form of cowardice. At least William Marcy Tweed had a certain sense of public style whilst he was looting the coffers...if the middle class must have its resources drained away supporting massive corporate welfare, scandals, and general chicanery, the least the can do is provide the fodder for some memorable cartoons...