June 20, 2012

HIGHER EDUCATION BUBBLE UPDATE: State Loan Agencies May Be Subject to Whistle-Blower Claims, Federal Appeals Court Rules.

In 2009, a former researcher with the U.S. Department of Education filed a lawsuit, charging that several student-loan agencies and companies had defrauded the federal government. But a judge dismissed the charges against four entities, all state-created student-loan authorities which had argued that they were not subject to suit under the federal False Claims Act.

Now, a three-judge panel of the U.S. Court of Appeals for the Fourth Circuit has ruled that the lower court did not properly determine if the state loan authorities were subject to the federal law. . . .

In the suit, Mr. Oberg contended that many of the nation’s largest student lenders, both for-profit companies and nonprofit corporations, had improperly received $1-billion dollars in excess federal subsidies. The lawsuit has resulted in several settlements with lenders, including one in which the company Nelnet agreed to pay $55-million.

Things are looking more like the housing bubble all the time. Who knew? The full opinion is here.

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