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Nelnet News

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Suit against Nelnet thrown out in Eight Circuit

The Eighth Circuit threw out a suit that was filed by a whistleblower against Nelnet, Inc. The whistleblower, Rudy Vigil, was a former loan advisor for the company. Vigil argued that Nelnet committed various acts of fraud, violating the rules and regulations under FFELP and therefore made the company liable under the False Claims Act (FCA).

Not all suits have had a favorable outcome for the company, however. Most notably, in November of 2010, Nelnet, along with other lenders, settled a suit brought against them by Dr. Jon Oberg. Oberg, a former researcher for the Department of Education, discovered that the company was illegally collecting millions of dollars in federal loan subsidies, and therefore stealing funds from taxpayers. Reporter Sam Dillon of the NYT detailed the allegations made by Oberg in May of 2007. As Dillon reported, these "vast overpayments" continued for three more years, even though Oberg brought it to the attention of his supervisors. Oberg won and Nelnet settled for $55 million. The case revealed that the department allowed student lenders to draw cash directly from the treasury. Yet since the case was settled out of court, the public will not learn the details of the scandal. Of course, this is a common tactic for high-profile companies, as it allows them to resolve litigation problems quietly.