Nelnet

Nelnet is a Nebraska-based lending conglomerate that deals in the administration and repayment of student loans.

History

Nelnet was founded as the UNIPAC Loan Service Corporation in 1978 and renamed Nelnet in 1996. Its current Chairman & Chief Executive Officer is Michael S. Dunlap. Nelnet holds over $25 billion in student loans as of 2007, roughly one-third of all federally subsidized student loans currently held by students in the United States.

Nelnet owns over 50 subsidiaries that administer and collect student loans throughout the United States and Canada, such as inTuition, infiNET, LoanSTAR, and TriCura Canada, Inc.

Controversies

Nelnet was recently investigated by the Inspector General's Office for allegations of misuse of federal student loan programs. A United States Department of Education audit revealed that since 1993, Nelnet has abused a loophole in federal tax legislation that allowed the company to receive a higher interest rate on specified loans, generating $278 million from taxpayers and possibly an excess $1.2 billion in profits. Nelnet has disputed the findings of the audit.

Ultimately, U.S. Department of Education Under Secretary Sara Tucker allowed Nelnet to keep the $278 million windfall. It is worth noting that Tucker had ties to Nelnet through the Hispanic College Fund, where she is the former Chief Executive Officer.

Nelnet has also made financial contributions to United States congressional campaigns, a practice that some have argued is improper given the fact that interest rates and lending preferences are often set by congressional committees. While some have argued that these contributions have led to favoritism shown to Nelnet, a conclusive link between the contributions and congressional actions has yet to be established.

In February 2007, New York Attorney General Andrew Cuomo launched an investigation into alleged deceptive lending practices by student loan providers, including The College Board, EduCap, Nelnet, Citibank, and Sallie Mae.