WASHINGTON -- A Nebraska company was improperly paid more than $278 million by misusing the federal student aid program, according to a federal audit released yesterday.
The overpayments could swell to $882 million through 2015 if the company, Nelnet, is not ordered to change its billing practices, the Education Department's inspector general found.
The department should make Nelnet return the money after the company does its own calculation of what it was overpaid, the audit says, estimating the figure at $278 million.
Nelnet officials called the report inaccurate and denied wrongdoing. They pledged to work with the Education Department on a resolution.
Mike Dunlap, the chairman of the company, said Nelnet will examine ``all other available remedies that prove the merits of our position. However this matter is resolved, we will continue to provide superior service."
Education Secretary Margaret Spellings will review the report and Nelnet's response before deciding how to proceed, said spokeswoman Katherine McLane.
``Secretary Spellings takes protection of American taxpayers very seriously and is concerned about the issues raised in the inspector general's report," McLane said.
The lawmaker who requested the audit, Senator Edward M. Kennedy, Democrat of Massachusetts, said the Education Department should take action. He said hundreds of millions of dollars have gone to waste.
``Nelnet should be required to pay back the ill-gotten proceeds from these loans, and that money should be used to benefit students," Kennedy said.
The top Democrat on the House education committee also jumped on the findings.
``The depth and breadth of Nelnet's failure to comply with the law is breathtaking," said Representative George Miller, Democrat of California.
Nelnet is one of the nation's largest providers of student loans. The audit describes the company as purposely exploiting the loophole that lawmakers have been trying to close.
At issue is a promise the government made to lenders in 1980 to return 9.5 percent on loans financed by tax-exempt bonds. It forced billions of dollars in payments to banks when interest rates dropped and the government had to make up the difference.
Congress has tried to end the lofty payments to banks, most recently in 2004. Yet lenders have found ways to keep drawing in the large government payments by recycling older loans.