The story is that the student loan administration had a loophole in their code that several lenders were taking advantage of, leading to payments of hundreds of millions of dollars by the government. A researcher in the department found this out and suggested that the director send a simple letter clarifying the rules. The Bush appointees shut him down and told him to work on other things. Eventually congress found out about it and put pressure, but still the “loyal Bushies” pushed back. Eventually, that simple letter was written and the government stopped throwing millions of dollars away.
A 2004 report by the Government Accountability Office urged the department to rewrite its regulations to save billions of dollars in future loan subsidy payments. But Ms. Stroup, who had once worked for one of the lending companies that is now under investigation for the subsidies, argued in response that it would be simpler for Congress to clamp down with new legislation.
Nelnet was the nation’s most generous corporate donor to the National Republican Congressional Committee in 2006, and its top three executives were the largest individual donors to the committee as well, according to the nonprofit Center for Responsive Politics.
Nelnet was also well connected at the department. Don Bouc, Nelnet’s president through 2004 and president emeritus thereafter, sat on the department’s Advisory Committee on Student Financial Assistance from 2001 through Feb. 1 of this year, even while the department was auditing the company’s subsidies and negotiating the settlement. Mr. Bouc resigned from the committee 11 days after the department announced that it would not seek to recover the $278 million.