Nelnet Receives Letter From Department of Ed Over Loan Payments

Nelnet announced today it received a letter from the Department of Education (Department) related to a previously announced audit report by the Department's Office of Inspector General (OIG) regarding certain loans receiving 9.5% special allowance payments. In its letter, the Department said that, until this matter is resolved, the Department will pay Nelnet's request for its special allowance payments using the generally applicable special allowance formulas, and not the 9.5% special allowance rate for these loans. The Department will pay the differential if the matter is resolved in the company's favor.

The Department said in its letter, "If resolution of the audit finding upholds the propriety of Nelnet's claim for special allowance at the 9.5% minimum return rate for some or all of the questioned loans, the Department will pay."

Nelnet believes the OIG audit report is incorrect and that the company has billed for these special allowance payments in accordance with applicable laws, regulations, and the Department's previous guidance, and therefore, disagrees with the Department's letter. Nelnet estimates the special allowance payments that will be withheld to be approximately $10 million for the third-quarter 2006.

The company will continue its focus on serving education-seeking families while working with the Department to reach a timely resolution of this matter. Nelnet will also examine all other remedies that prove the merits of the company's position.

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