"Back in 2003, a former university professor and congressional staff member named Jon H. Oberg was toiling away as a researcher at the U.S. Department of Education, nearing retirement, when he noticed something odd," according to The Chronicle of Higher Education.
"Through a careful maneuver, Mr. Oberg realized, banks using federal money to issue loans to college students had devised a clever way to keep a lot more of that money than they were supposed to.
It traced back to a system designed to help students during the economic troubles of the 1980s. In order to encourage banks to help those students, the government promised nonprofit lenders a fixed 9.5-percent rate of return on student loans. In a time of relatively high interest rates, that promise made some sense; in the 1990s, when the economy improved and rates fell, it turned into a financial windfall for lenders.
So Congress voted to shut off that subsidy — with the exception of existing loans. But several loan companies, Mr. Oberg figured out, had devised a system to essentially pass new loan money through old loan portfolios that were eligible for the 9.5-percent repayment rate, thereby making hundreds of millions of dollars in excess profits.
Mr. Oberg tried to warn officials in his department of the problem; he was told to find something else to work on. At that point, he became a whistle-blower. He has spent the last 10 years helping government lawyers prove the scheme in court, as they tried to hold nine loan companies responsible.
The last of those cases ended on Tuesday. The government won seven of the cases, recovering more than $70 million of taxpayer money in the process."
NASFAA's "Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.
Publication Date: 12/6/2017