Nelnet execs in line for bigger bonuses

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BY MATT OLBERDING / Lincoln Journal Star

Nelnet’s two top executives could be in line for bigger bonuses next year. 

That will depend on whether student loan financial company is able to overcome a potentially unfriendly Democratic majority in Congress and the possibility of having to repay millions of dollars in student loan subsidies.

According to documents filed Monday with the Securities and Exchange Commission, Nelnet has approved a bonus plan for co-CEOs Mike Dunlap and Stephen Butterfield that will pay them $500,000 apiece for every $1 per share the company earns in 2007.

That could mean larger bonuses for the two than they have received in the past, based on earnings projections.

If the plan had been in effect this year, the two would be in line to earn about $1.15 million apiece in bonuses, based on financial analyst estimates of earnings of about $2.32 a share. That would be about the same as the two earned in 2005.

Market analyst consensus for next year’s earnings is $2.52 a share, meaning each would earn about $1.25 million in bonuses under the new plan.

At least one analyst thinks the company could earn as much as $3 a share in 2007 — if it doesn’t lose a government subsidy that guarantees it a 9.5 percent return on certain student loans.

Nelnet and other companies’ use of a loophole to continue receiving that subsidy after the government intended it to end has come under criticism in Congress and elsewhere. A report issued in September by the investigative arm of the Department of Education concluded Nelnet improperly received $278 million in subsidies from the federal government.

The company is still waiting to hear whether the government wants it to pay back any of that money.

Nelnet’s future earnings also might be affected by the Democratic takeover of Congress.

Two Nelnet critics, Rep. George Miller of California and Massachusetts Sen. Ted Kennedy, are in line to chair education committees, and oversight of student loan programs is expected to be an area of scrutiny.

The company seemed to sense that a Democratic Congress might not be good for business, as Nelnet was one of the largest contributors to the National Republican Congressional Committee before the Nov. 7 election.

“Nelnet looks forward to working with all the new members and committee chairs to provide the most options for helping families finance their college educations,” said Nelnet spokesman Ben Kiser. “Nelnet believes both parties recognize the importance of student lending programs.”

Since the election, Nelnet’s stock has dropped more than 10 percent, hitting a 52-week low of $25.24 on Monday.

In the SEC filing, Nelnet says the bonus plan, which was approved by the Nelnet board’s compensation committee on Nov. 14, is “an incentive and reward for their leadership, ability and exceptional services.”

The changes approved by the board “are consistent with the company’s strategy of long-term earnings growth, which correlates directly with growth in shareholder value,” Kiser said.