Oct 06, 2006
EdFed News Wire

America's Top Student Loan Consolidator
Friday, October 6 , 2006
Taxpayers Pick Up the Tab
By Mary Waldron
On Friday, September 29, 2006, the U.S. Department of Education issued an audit citing the National Education Loan Network (Nelnet)'s alleged wrongful use of tax-exempt bonds to profit from high-interest payments made by the U.S. government. According to the audit, Nelnet has collected $278 million in federal subsidy payments, in addition to $882 million it wrongly charged the U.S. government. Nelnet has disputed these findings but insists it will "work with the department to resolve them."

So how has this student loan lender managed to cash in so enormously? By abusing a loophole in federal law that was intended to be closed in 1993. This loophole originated from a student loan program that allowed lenders to finance loans using non-taxable bonds issued before October of 1993 and thereby acquire government-subsidized interest rates of 9.5 percent. Although borrowers still paid a low rate of 3.37 percent, loans processed with these bonds were guaranteed interest rates of 9.5 percent, which left a 6.13-percent margin of pure profit for lenders and a hefty bill for U.S. taxpayers. Despite the government's attempt to block the use of tax-exempt bonds through the Higher Education Reconciliation Act, some lenders still found ways to reuse the pre-1993 loan funds.

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Third Extension for the HEA

By Charisse Dengler

With the current Higher Education Extension Act (HEA) about to run out on September 30, Ric Keller, Chairman of the House Committee on Education and the Workforce, proposed the year's third extension on September 22. Keller's bill, formally known as H.R. 6138, extended the Higher Education Act and its programs through the end of June 2007.

As planned, the House passed the bill on September 28, and the Senate followed suit the next day. President Bush finalized the matter by signing the extension into law on October 1.

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Bill helps HEA escape Congress' reauthorizing move

The Senate passed a third short-term extension bill for the Higher Education Act (HEA) to prevent its expiration on September 30. The Third Higher Education Extension Act of 2006, H.R. 6138, extends all HEA programs to June 30, 2007.
Spellings spells out American Dream to HE

Education Secretary Margaret Spellings described American colleges and universities as the "incubators to great ideas and the keys to the American Dream." In the Houston Chronicle, she lamented that the dream and the dreamer have become more and more distanced, due to prohibitively high tuition fees.

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