STUDENT DEBT- CALPIRG student volunteers at UC Berkeley discuss the ball and chain of student debt with members of the local media. CALPIRG is working at the state and federal level to stop powerful interests like student loan companies from preying on college students.

Taxpayers, Students Cheated Out Of Millions By Lender

While the cost of a college education continues to rise astronomically, student loan conglomerate Nelnet has reportedly bilked $278 million from taxpayers.

Their scheme involved misusing the complicated system of federal tax breaks for student loan programs. 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. The program 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 volume of its loans that qualified for the guaranteed rate—from $3.7 million to $551 million.

The Nelnet rip-off 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,” according to CALPIRG Higher Education Advocate Luke Swarthout. “The real solution to this problem involves not only recouping these losses, but also putting an end to programs that enrich lenders while hurting students and taxpayers.”

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 CALPIRG’s higher education program and others has shown that textbook 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. A new CALPIRG report, “Required Reading: A Look at the Worst Publishing Tactics at Work,” shows that 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.

When publishers sell textbooks bundled—that’s when they include supplemental, but often unnecessary, workbooks or CD-ROMS—they should make the same textbooks available separately to help students save money. Publishers could also 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 text from their classmate.

Colleges and universities can also help by providing many forums for students to purchase or rent used books, including online book-swaps where students can buy and sell used books and set their own prices.