A former Nebraskan brought to light a loophole that has allowed student loan companies, including Lincoln’s Nelnet, to reap hundreds of millions in additional profits at taxpayers’ expense. 

Jon Oberg, who up until now had remained anonymous, revealed Monday that he was the Department of Education employee who did the work that brought to public attention the practice that allowed companies to package newer loans with older loans to continue to receive a government-guaranteed 9.5 percent subsidy.

Oberg, a graduate of the University of Nebraska-Lincoln,  was an aide to the late Sen. Jim Exon and former chief fiscal officer for the State of Nebraska.  

He spoke at a conference in Washington, D.C., on Monday called “Student Loan Scandals: A Whistleblower and Maverick Report.” It was sponsored by the New America Foundation, a public policy think tank that has been critical of companies’ use of the 9.5 percent subsidy.

The 63-year-old Oberg, who lives in Maryland and has retired from the Department of Education, said in an interview Wednesday that he decided to go public because he was asked to by the foundation.

“This was just the first opportunity,” he said.

Oberg declined further comment on the 9.5 percent subsidy, saying coverage of the matter “should not be about personalities, but about issues.”

Oberg said he was a researcher with the Education Department in 2003 when he noticed “irregularities” in financial reports of several secondary market student loan providers.

He said he reported those to the Department of Education, the Department’s inspector general, and to the Government Accountability Office.

Oberg said he then was told  not to research the issue further, but decided to do so on his own time.

He said he had trouble getting information on the 9.5 percent subsidy payments from the department and instead had to go through congressional staff members.

His research eventually was used in a 2004 report by The Institute for College Access and Success, written by Robert Shireman and James Kvaal, who criticized the practice, and in a GAO report on the 9.5 percent subsidy that was published in September 2004.

The reports showed that instead of shrinking, as was intended by a 1993 change in law, the a pool of loans being used for the subsidy was actually increasing.

The Institute for College Access and Success report also named Nelnet as the biggest beneficiary of the loophole.

Nelnet has acknowledged using the loophole and as of June 30 had booked more than $322 million in revenue from it. The company says it has opposed the practice as public policy since early 2003 and  stopped adding loans that qualified for it when legislation was introduced to forbid it.

Nelnet is awaiting a final report from the Office of Inspector General on an audit of the company’s portfolio of loans receiving the 9.5 percent subsidy.

Last month, the company said a draft report from the inspector general recommended it repay “overpayments” it earned from the loans.  Nelnet didn’t say what that sum was. 

Nelnet spokesman Ben Kiser said the company sent a response to the inspector general’s draft report earlier this month.

Kiser declined to discuss the substance of Nelnet’s response, but said the company disagrees with the findings in the draft report.

“We’re very confident in our position and believe that we have adhered to the laws, regulations and guidelines surrounding this provision,” he said.

Kiser also said the company has been very  “clear and open” about its use of the provision and has cooperated with the Office of the Inspector General. 

He said the company has been given no indication when the final report will be issued. 

Kiser had no comment on Oberg’s revelation. 

Reach Matt Olberding at 473-2647 or molberding@journalstar.com.