Four Student Aid Lenders Settle False Claims Act Suit for Total of $57.75 Million

WASHINGTON – Four student aid lenders have paid the United States a total of $57.75 million to resolve allegations that they improperly inflated their entitlement to certain interest rate subsidies from the U.S. Department of Education in violation of the False Claims Act, the Justice Department announced today.

The settlements resolve allegations brought in a whistleblower action filed in the Eastern District of Virginia under the False Claims Act, which permits private citizens to bring lawsuits alleging violations of the Act on behalf of the United States and to share in any recovery. The whistleblower suit was filed by Dr. Jon Oberg, a former employee of the Department of Education, who alleged that several lenders participating in the federal student financial aid programs created billing systems that allowed them to receive improperly inflated interest rate subsidies from the Department of Education. The United States did not intervene in this action, which was litigated by the whistleblower, but it provided assistance at many stages of the case, including during the settlement process.

Nelnet Inc. and Nelnet Educational Loan Funding Inc. have paid $47 million to the United States. Southwest Student Services Corp. has paid $5 million. Brazos Higher Education Authority and Brazos Higher Education Service Corp. have paid $4 million. Panhandle Plains Higher Education Authority and Panhandle Plains Management and Servicing Corp. have paid $1.75 million. Dr. Oberg will receive a total of $16.65 million from these settlements.

"Collaboration between the federal government and citizens with knowledge of fraud is important to the successful enforcement of the False Claims Act," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "Whistleblowers like Dr. Oberg are critical to our efforts to recover taxpayer money lost to waste, fraud, and abuse."

"The U.S. Attorney’s Office remains committed to assisting ordinary citizens who blow the whistle on wrongdoing by companies that take taxpayer dollars," said Neil MacBride, U.S. Attorney for the Eastern District of Virginia. "Through the efforts of one citizen and the government, these lenders will be paying millions back to the government."

This case was handled on behalf of the United States by the Civil Division of the Department of Justice and the U.S. Attorney’s Office for the Eastern District of Virginia, with the assistance of the Department of Education Office of General Counsel.