From October 2001 to December 2006, the Student Loan People collected $142.8 million in "special allowance payments under the 9.5 percent floor calculation" from the U.S. Department of Education.
On Friday, the Department's Inspector General issued a report concluding that $88.5 million of that amount should not have been claimed and that at least $9 million should be repaid to the federal government.
Here are bare bones of the story. The Student Loan People had long claimed that a limited number of loans qualified for a very old, very generous version of the federal subsidy. Starting in 2004, they claimed that many more loans qualified. In early 2007, the Department announced that it would require added evidence that the loans were really eligible, and the Student Loan People were (in their own words) "unable to make such assertions and therefore lost all ... payments effective for all quarters ending on or after December 31, 2006." The graph to the left gives the basics of the sudden growth and abrupt decline of that income stream.
Those payments were one of four big losses that hit the Student Loan people, along with the transfer of millions from their reserves to the state's general fund in 2004-05 and 2005-06, federal cuts to other lender subsidies in late 2007, and the credit crisis that began in early 2008.
Seeing all four changes together, I do understand why the Student Loan People made Best in Class commitments and now cannot easily deliver all they promised.
Click here to read the full report from the Inspector General, and here to read past posts on Best in Class, including samples of publications that describing the program as a commitment that students preparing for teaching careers were encouraged to count on for the future.