IF THIS IS TRUE, IT IS THE WORST SCANDAL EVER WITH STUDENT LOANS. THIS COULD AFFECT, PROBABLY, MILLIONS OF YOUNG PEOPLE.mjNELNET - ADMINISTRATOR OF STUDENT LOANS
Nelnet (NYSE: NNI) is a Lincoln, Nebraska-based lending conglomerate that deals in the administration and repayment of student loans. Nelnet was founded as the UNIPAC Loan Service Corporation in 1978 and renamed Nelnet in 1996.
Its current Chairman & Chief Executive Officer is Michael S. Dunlap. Nelnet holds over $25 billion in student loans as of 2007, roughly one-third of all federally subsidized student loans currently held by students in the United States. Nelnet owns over 50 subsidiaries that administer and collect student loans throughout the United States and Canada, such as inTuition, infiNET, LoanSTAR, and TriCura Canada, Inc. One of their lobbyists is Clark Lytle Gelduldig & Cranford.
Nelnet appears to be one of the sources of the many problems experienced in October 2011 with the U.S. Department of Education's transition from its proprietary website to what appears to be a "Nelnet, Inc. (US)" hosted website for a new platform for online servicing of federal student loans formerly handled by the government. Nelnet was recently investigated by the Inspector General's Office for allegations of misuse of federal student loan programs. A United States Department of Education audit revealed that since 1993, Nelnet has abused a loophole in federal tax legislation that allowed the company to receive a higher interest rate on specified loans, generating $278 million from taxpayers and possibly an excess $1.2 billion in profits.
Nelnet has disputed the findings of the audit through a letter written to the United States Department of Education letting them know of this loophole. This letter was met with a response 13 months later from the Department of Education which stated that the Department did not know of this and gave a list of people to contact to see what was wrong with the loophole. Ultimately, U.S. Department of Education Under Secretary Sara Tucker allowed Nelnet to keep the $278 million windfall. It is worth noting that Tucker had ties to Nelnet through the Hispanic College Fund, where she is the former Chief Executive Officer.
Nelnet has also made financial contributions to United States congressional campaigns, a practice that some have argued is improper given the fact that interest rates and lending preferences are often set by congressional committees. While some have argued that these contributions have led to favoritism shown to Nelnet, a conclusive link between the contributions and congressional actions has yet to be established. In February 2007, New York Attorney General Andrew Cuomo launched an investigation into alleged deceptive lending practices by student loan providers, including The College Board, EduCap, Nelnet, Citibank, and Sallie Mae.
The New York Times reported in August 2007 that Jon Bruning, the current Nebraska Attorney General, allowed Nelnet to renege on a $1 million settlement the company reached with Bruning in April 2007. Nelnet was accused of industry wide kickbacks, improper inducements, and gifts from student loan providers to colleges and universities. Nelnet quickly shut down a Nebraska investigation into its activities by agreeing to provide $1 million to the state in support of a national financial aid awareness campaign.
Bruning decided in August 2007 to forgive Nelnet its $1 million obligation after the company announced that it had reached a separate $2 million settlement with New York State Attorney General Andrew Cuomo to end the AG's investigation into Nelnet's business practices.
Mr. Bruning called Cuomo’s investigation of Nelnet and other student-loan companies “ridiculous” and “political.” According to Bruning's spokeswoman, Bruning decided to forgive Nelnet's obligation because "it doesn’t make sense to create two funds for the same purpose."
Officials from Nelnet and Union Bank & Trust Company, which are both owned by the same family, gave $16,100 to Bruning for his Senate election campaign, including $2,300 from Nelnet President Jeff Noordhoek, just 16 days before the two would appear together to announce the $1 million settlement. In his interview with the Omaha World-Herald, Mr. Bruning called himself “a friend of Nelnet” and said he would “never apologize” for his relationship with the company.
The Chronicle of Higher Education reported in August 2010, that Nelnet settled a case for $55 million. The suit was filed by a former Department of Education researcher named Dr. Jon Oberg.Nelnet and other lenders were accused of defrauding taxpayers of billions of dollars in student loan subsidies. The largest student lender in the country, Sallie Mae, is also listed as a defendant in the case.
$112 Billion Student Loan Industry Bailout a Lesson in Corporate Welfare
By: Jon Walker Thursday March 11, 2010 8:04 am