Nelnet, others sued over misuse of subsidy

Journalstar.com ^ | 8-31-2009 | Matt Olberding

[stan_sipple]

A former Department of Education researcher who brought to light the loophole that allowed student loan companies, including Lincoln's Nelnet, to reap hundreds of millions in profits at taxpayers' expense, has filed a whistleblower lawsuit against those same companies.

Jon Oberg, a University of Nebraska-Lincoln graduate and former aide to former U.S. Sen. Jim Exon, filed the suit in U.S. District Court for the Eastern District of Virginia.

Nelnet is the lead defendant, but since the Lincoln student loan company settled its differences with the federal government more than two years ago, its spokesman said Nelnet considers the matter closed.

"Without having seen the litigation there's nothing to comment upon," said Nelnet spokesman Ben Kiser.

The suit seeks the return of about $1 billion in "special allowance" payments wrongfully obtained under a federal subsidy program.

The subsidy guaranteed a 9.5 percent return on a limited class of student loans. It was created in the 1980s to ensure low-cost student loans at a time when the economy was souring and interest rates were high.

It was largely phased out in 1993, but companies found a loophole that allowed them to actually expand the amount of loans receiving the subsidy by recycling older loans and packaging them with newer ones.

[rarestia]

Christ... I have about $8,000 in loans left with these boneheads, I hope this doesn’t mess up my repayment plan.

My loan is fixed at 3.125%. I hope I wasn’t one of those lucky recipients of a recycled loan. That would piss me off.

[lt.america]

“Rein said that under the Civil False Claims Act, Oberg, as whistleblower, is entitled to up to 30 percent of any judgment - potentially $900 million”

The question I have is, was Nelnet keeping there apr low through this loophole? If so, I could care less. If they were fleecing customers, then I have a problem.

I also have a problem with the amount of money Mr Rein could receive through the filing of this litigation. 900 million....that is criminal in itself.

[stan_sipple]

if you dig back to the waning days of disco, you will find that this government give away was one of Ted’s brilliant ideas

[stan_sipple]

Nelnet had clever lawyers I dont think they really broke a law, it just looked bad now that rates are super low