PHEAA's Gobble, Gobble

HIGHEREDWATCH.ORG

November 20, 2007

Happy Thanksgiving from Higher Ed Watch

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In honor of the conclusion of the harvest season—and in order to give ourselves plenty of time for turkey, mashed potatoes, and pumpkin pie—Higher Ed Watch is taking the week off to celebrate Thanksgiving. But we'd be remiss not to also note the Pennsylvania Higher Education Assistance Authority's (PHEAA) turkey surprise.

First, we have a lot to be thankful for here at Higher Ed Watch. The College Cost Reduction Act is going to reduce excessive federal loan subsidies by more than $20 billion over the next five years and steer that money to increased financial aid for over six million students. Investigations that we helped prompt of conflicts of interest between student lenders and college and federal officials have led to reform across the country, and new federal regulations will soon be enacted into law with a reauthorized Higher Education Act.

PHEAA's Turkey

But as we get ready to sit down for our Thanksgiving meals, we are also reminded that there is much work still to be done. Yesterday, the Department of Education’s Inspector General released its third report on student loan company abuse of 9.5 percent loans. The Inspector General found that the Pennsylvania loan provider PHEAA over-billed the Department of Education (that means U.S. taxpayers) by at least $35 million on improperly claimed 9.5 percent loans—and that overbilling was only after the whistle was blown on PHEAA's scheme, meaning that total overbilling will likely be found to be much, much larger. Secretary of Education Margaret Spellings has given no indication that she will try to recoup the funds. Earlier this year, she reached a $300 million settlement with Nelnet and agreed to forgive relatively old overpayments. But the Inspector General's report on PHEAA estimates overpayments that aren't that old and for which PHEAA has little in the way of excuses. We'll see what happens.

Higher Ed Watch sincerely hopes that Spellings will follow the IG’s recommendation and require PHEAA to "return all overpayments." Renewing her commitment to accountability at the Department of Education would fit the spirit of the season.

Happy Thanksgiving to all! And as President Bush reminded us in a speech yesterday, remember to give thanks for the "devoted teachers who prepare our children for the opportunities of tomorrow."

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Comments

Loophole

Submitted by barberanne (not verified) on November 20, 2007.

PHEAA, Nelnet, and many other student loan agencies took advantage of legislation that allowed them to collect 9.5% on loans that would normally have been eligible for a lower rate. Nelnet, to name just one company, used the profits made through their windfall to give generous--approx. 1.5 million dollar each--bonuses to their top brass. PHEAA used its money to fund its public service committment to the state of Pennsylvania to the tune of $200 million for each of the past five years. That's a contribution of about $75 to the state's grant program each year, plus loan forgiveness and other tangible financial assistance to students. Congress passed on several opportunities, over two administrations, to change the legislation that allowed non-profits to take advantage of this interest rate benefit. If PHEAA is required to return the money it collected, so should Nelnet and many others.