On February 9th, the New York Times reported that the government student loan provider Navient overcharged the government $22 million in student loan subsidies. This began from a 2009 investigation by the Department of Education inspector general during the George W. Bush administration. A whistleblower in the Education Department discovered this massive amount owed to the government. Only now, more than 10 years later, the department’s acting secretary is demanding the money back.
Progressive members of Congress such as Elizabeth Warren are credited with pushing the DOE to collect this money that has been unattended to for years. According to teh New York Times “In the 1980s, the government guaranteed lenders a 9.5 percent interest rate on student loans financed by tax-exempt bonds. As interest rates plunged, that return became extremely attractive. Congress ended the subsidy in 1993 but grandfathered in existing bonds, assuming they would soon be paid off. Instead, lenders found ways to keep recycling and repackaging the existing loans, allowing them to reap hundreds of millions of dollars in additional subsidies. A 2009 audit by the Education Department’s inspector general found that Navient, then operating as Sallie Mae, had overcharged the government millions of dollars.”
Navient consistently dodged this repayment, even when an administrative law judge ordered the refund in 2019. Navient filed an appeal to further delay the order in the hopes that former Education Secretary Betsy DeVos would overturn it.
A spokesman for Navient said “We are disappointed with this ruling because we believe these practices were consistent with Department of Education guidance . . .We are assessing our options.”
This is a small victory for the DOE to further squeeze Navient and prevent them from wiggling free of the $22 million owed to the government. With the new Biden administration a forefront issue is the surmounting student loan debt in this country and the possibilities of debt discharge, from as little as $10,000 to the entirety of the estimated $1.4 trillion dollars worth of debt.
Image credit: US embassy London via flickr