November 28, 2007

Might a Bush Friend Be Pressing Spellings on Nelnet?

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

Comments

1. The same issue regarding federal subsidies is in question in Pennsylvania with AES/PHEAA, our not for profit guaranty agency. What I do not understand in this matter is how or why the controversy even exists. The question should be answered by the Higher Education Act of 1965, as amended. These subsidies were either legal or illegal. Case closed. What did the law state at the time these subsidies were paid?

   — Feudi Pandola    Nov 29, 08:23 AM    #

2. Another proof of the rich getting richer in the student loan scandal while those who should have long ago been give “loan forgiveness” keep paying “interest and penalties.” Let’s see, $322 million divided by say an average $12,000 payback on a student loan (with $6,000 the average in “penalties and interest”): how many loans could be forgiven for those who legitimately went bankrupt or became disabled? Perhaps Secretary Spelling, who seems along with her other “administrators” not to be concerned about these people, can at least be fair, open and honest and change the acronym from Nelnet to Debtnet. Then at least the Department of Education’s real purpose could be clearly understood by all.

   — steve    Nov 29, 12:40 PM    #

3. Intent is not the same as action taken. The intent may have been to let these subsidies to expire, but if congress did not effectively end them through legislation, then they have no one to blame but themselves.

   — Paul    Nov 29, 04:21 PM    #

4. Lenders are making obscene profits (without risk) while students are buried in debt. If this nation really wants to educate students, we should move all student loans to the Direct Loan Program and offer subsidized loans of no less than $10,000 per year with a 2% interest rate in repayment….lets spend our money on educating students instead of enriching the lending industry.

   — AFC    Nov 29, 05:57 PM    #

5. The Federal student loan program has helped we get threw school and i still struggled to get enough money. So them keeping money that i could of recevied so they could stuff there pockets is crap. I have 15 credit hours and work on average 24 hours a week and stuggle to get the money needed. Thanks alot for putting a burdon on me and my family

   — Donnie Laramie    Dec 2, 04:15 PM    #

6. While the President and Spellings have been protecting the interests of lenders for the last few years, they have been squeezing the hopes of low-income students by attacking the TRIO and GEAR Up programs. These programs have been successful at preparing and helping low-income, first-generation and disabled students get to and graduate from college for 40 plus years. Why would they look to cut these educational opportunity programs, but knowingly aid lenders with unethical practices?

   — Reggie    Dec 3, 09:59 AM    #

Previous: U. of Washington Scientist Fabricated AIDS Research, Report Says
Next: Bluffton U. Athletes and Coaches Seek Insurance Money From Deadly Bus Crash