Sallie Mae, participant in the 9.5 percent scam?

Sallie Mae has long boasted that it did not take part in the 9.5 percent student loan scheme. But a new report from the U.S. Department of Education's Inspector General (IG) refutes that claim. participant

According to the report, which was released on Monday, Sallie Mae improperly obtained $22.3 million in excess student loan subsidies from the federal government between Oct. 1, 2003 and Sept. 30, 2006. The actual amount that the company over-billed the government is probably substantially higher -- as the IG looked only at how the student loan giant handled the 9.5 loans it obtained through its purchase of Nellie Mae [NLMA], the Massachusetts non-profit student loan agency. Between 2000 and the end of 2004, Sallie Mae bought three other non-profit lenders, including the Arizona-based Southwest Student Services Corporation, which had increased the volume of federal loans that it claimed eligible for the 9.5 percent guarantee by 135 percent in the years immediately preceding the sale.

To be clear, Sallie Mae does not appear to have engaged in the type of loan and bond manipulations that other companies, like Nelnet and the Kentucky Higher Education Student Loan Corporation, did to massively grow their 9.5 loan holdings. Instead, the loan company violated the law by submitting 9.5 claims on loans financed by tax-exempt bonds that had matured and been retired, the IG report states.