Roundup: Week of January 28 – February 1

PHEAA May Pay $15 Million For 9.5% Loan Payments

The Department of Education has asked the Pennsylvania Higher Education Assistance Agency (PHEAA), one of the country’s largest nonprofit student loan providers, to repay as much as $15 million in federal payments it improperly obtained by exploiting a subsidy program that guaranteed loan providers a 9.5 percent rate of return on government-backed student loans. The request comes two months after an audit by the Departments own Inspector General found that PHEAA had improperly obtained $34 million in subsidy payments. The Department rejected these findings and suggested the $15 million price tag but is ultimately letting PHEAA decide how much it has to repay. A PHEAA spokesman suggested to The New York Times that the lender may end up with “zero liability.” PHEAA is the first party in the 9.5 scandal to be held financialy accountable for its actions. In 2006 another lender, Nelnet, was caught with $278 in improperly obtained Department funds. The Department asked for the money back, but then let Nelnet off without paying anything. In light of Nelnets free pass, Rep. George Miller, the California Democrat who is chairman of the House of Representatives Committee on Education and Labor, called the PHEAA request “a step in the right direction.”

25 HBCUs Send to House Ed Committee in Favor of Default Rate Change

The presidents and chancellors of 25 historically black public colleges and universities sent a letter on Tuesday to the leaders of the House Education and Labor Committee supporting a provision in a bill reauthorizing the Higher Education Act that would extend the window the federal government uses for measuring student loan defaults from two to three years. By sending the letter, which was also signed by the American Association of State Colleges, the leaders of these colleges sought to undercut arguments being put forward by for-profit college lobbyists — who are vigorously opposing the amendment — that historically black colleges would suffer if the provision is enacted. “This amendment will provide more meaningful and accurate information that will help institutions, lenders, and the Department of Education help students avoid student loan default,” the black-college leaders wrote. “Default is avoidable, and we know that student borrowers usually default because they are not aware of all the student loan repayment options afforded to them under the law.” The House is expected to take up its version of the Higher Education Act legislation next week.

Sallie Mae Settles

Sallie Mae has reached an agreement with its onetime buyers, ending a months-long legal battle and injecting some needed credit into the embattled lender. As a result of the settlement, Sallie Mae dropped a lawsuit it had filed against a consortium of potential buyers including Bank of America, JP Morgan Chase and the private equity firm J. C. Flowers & Co. after they backed out of the proposed $25 billion buyout deal in October. As part of the agreement, the consortium will refinance about $30 billion of Sallie Maes debt. The settlement is good news for the financially-troubled lender, which posted a $1.6 billion loss for the fourth quarter last year and recently announced it will cut back on its “subprime” student loans.

Asian Americans, Not Whites, Gain When Affirmative Action Axed

Asian-Americans, not whites, gain the most when affirmative action is eliminated from college admissions processes, according to a forthcoming study (summarized in the Chronicle of Higher Education, subscription required). Using enrollment data from 1990 to 2005 at the University of Florida, the University of Texas at Austin and the University of California campuses at Berkeley, Los Angeles, and San Diego, the study found that enrollment of blacks fell by up to 50 percent after the schools eliminated race as a factor in admissions decisions. Asian-Americans, the same data shows, filled four out of every five spots previously held by black students. For example, at UC-Berkeley, enrollment of Asian-Americans rose from 37 percent in 1995, the year before a ban on affirmative action went into effect, to 47 percent in 2005. The study will be published next week in InterActions: UCLA Journal of Education and Information Studies.