January 23, 2007

WASHINGTON -- Congressman Tom Petri (R-WI) said today that the Department of Education was wrong to accept a settlement announced late Friday with Nebraska-based Nelnet, Inc., which will allow the student lender to keep disputed subsidies.

"I am disappointed by the decision not to collect the $278 million in subsidies paid to student lender Nelnet after it was found intentionally manipulating taxpayer subsidies by recycling antiquated '9.5% floor loans,'" Petri said.

In a September audit report, the Inspector General of the Education Department concluded that Nelnet had received the funds through the inappropriate exploitation of a loophole in federal rules, and should be forced to return all the money.

"Although the Department has decided not to pay further subsidies, amounting to $882 million on the loans in question, in light of the Inspector General's findings I am concerned that taxpayers have been ill-served by the Department's decision not to collect the earlier payments," Petri said.

"This is an unfortunate example of waste, fraud, and abuse in the Federal Family Education loan program. I look forward to working with the members of the Education and Labor Committee on a bipartisan basis to review this settlement, as well as the larger structure of taxpayer-funded subsidies to student loan lenders," he said. "I invite my colleagues to join me in encouraging the Secretary to revisit this decision."