STUDENTS SPEAK OUT—Trea McPherson III, a student at the University of Connecticut, spoke to officials at the Department of Education, urging them to reduce student debt. Meanwhile, a student loan lender bilked millions of dollars in taxpayer subsidies.

Taxpayers, Students Cheated Out Of Millions

With the cost of a college education rising astronomically and no relief in sight from Congress, student loan conglomerate Nelnet bilked $278 million dollars from taxpayers.

The federal government provides tax breaks for student loan programs. While the regulations surrounding these tax breaks are very complicated, Nelnet found a way to exploit what’s known as the “9.5 percent floor,” a program that guarantees a 9.5 percent interest rate on some loans regardless of prevailing market rates. It allows lenders to reap higher-than-market profit on their student loan programs.

Over the course of a year, Nelnet used dubious accounting principles to increase the number of its loans that qualified for the guaranteed rate—from $3.7 million to $551 million. The program that guarantees this “above market” rate is controversial itself, and higher education advocates have called for its repeal.

The Nelnet ripoff was uncovered by the Inspector General’s office, which recommended that the Department of Education recoup the $278 million, and put a stop to the payments that could reap Nelnet a total of $1.2 billion in undeserved subsidies.

“This is a typical story of a complicated program hidden from the scrutiny of taxpayers who are getting ripped off,” said Higher Education Advocate Luke Swarthout.

“To really solve this problem requires the Department of Education to stop payment on these illicit 9.5 percent loans and to demand repayment for subsidies that were wrongly charged.”

Textbook Prices On The Rise
On another front affecting college students and their parents, textbook prices rose once again across the country. Over the last three years, research conducted by PIRG’s Higher Education Program and others have shown that textbooks prices add insult to injury in the skyrocketing price of college education.

Publishers are squeezing more money out of students and parents through a set of practices that are of questionable value at best. “Required Reading: A Look at the Worst Publishing Tactics at Work,” shows the cost of textbooks has risen at four times the rate of inflation since 1994.

Our Higher Education Project recommends a few simple, but high-priority policy changes to make college textbooks affordable to all students.

Publishers should give preference to print or online supplements instead of producing entirely new editions of textbooks—allowing students to buy used copies of the previous year’s Math 101 text from their classmate.

Colleges and universities can also help out by providing many forums for students to purchase or rent used books, encouraging students to use online book-swaps so that they can buy and sell used books and set their own prices.