Student Loan Scandals

Within the next two weeks, the U.S. Department of Education’s Inspector General is expected to release an audit of the Nelnet Corporation, a major student loan provider, recommending that it be ordered to repay hundreds millions of dollars in taxpayer subsidy payments to the U.S. Treasury and halt additional, future subsidy billings estimated to exceed $1.3 billion.

At issue are subsidy payments guaranteeing Nelnet and other student loan companies a 9.5 percent rate of return for student loans originally issued at interest rates as low as 3.5 percent. Congress thought it got rid of the 9.5 percent guarantee in 1993, but due to a legislative loophole and lax federal oversight, the subsidy continued and grew exponentially over the last several years.

At this New America event, the Bush Administration whistleblower who originally reported the 9.5 percent loan scandal to Congress and the media told his side of the story in his first-ever public appearance.

In addition, Raza Khan, President and Co-Founder of student loan provider MyRichUncle, discussed additional taxpayer subsidies in the federal student loan program and how lenders use the extra money in ways that might or might not be in the best interests of students and families. Doug Lederman, editor of Inside Higher Ed, responded to the remarks of both speakers.

In addition to the video at right, an MP3 audio recording of this event is available for download.

Participants

• Raza Khan
  President & Co-Founder, MyRichUncle
  
• Doug Lederman
  Editor, Inside Higher Ed
  
• Michael Dannenberg
  Director, Education Policy Program, New America Foundation