This was published two-three days ago in the NYTimes. Fasten your seat belts, this will take you aback.

Congress and the Student Loan Scam - May 8, 2007 -

Republicans in Congress have generally defended corporate welfare for companies involved in the student loan business: lenders that collect billions of dollars in federal subsidies in return for issuing government-backed loans that represent no real risk to the companies themselves. But support for these wasteful subsidies is waning in both parties, thanks to recent revelations showing just how corrupt and costly the program has become…. Mr. Oberg told the department that it could just shut off the subsidies by simply sending the lenders a letter. But his bosses feigned ignorance and twiddled their thumbs for three more years while the lenders grew fat off billions that should have been going directly to needy students. Worse still, one well-connected company was allowed to keep $278 million in subsidies after the department’s inspector general found them improper…

 

Whistle-Blower on Student Aid Is Vindicated - May 7, 2007 -

The department “does not have an intramural program of research on postsecondary education finance,” the supervisor, Grover Whitehurst, a political appointee, wrote in a November 2003 e-mail message to Mr. Oberg, a civil servant who was soon to retire. “In the 18 months you have remaining, I will expect your time and talents to be directed primarily to our business of conceptualizing, competing and monitoring research grants.”… The story of Mr. Oberg’s effort to stop this hemorrhage of taxpayers’ money opens a window, lawmakers say, onto how the Bush administration repeatedly resisted calls to improve oversight of the $85 billion student loan industry. The department failed to halt the payments to lenders who had exploited loopholes to inflate their eligibility for subsidies on the student loans they issued….

The subsidy payments that Mr. Oberg uncovered are another corner of the lending system on which the department long failed to act, critics say, letting millions of dollars flow from the public treasury to about a dozen lenders. The department now says it did not fully understand the extent of the maneuvers the loan companies were making to get the subsidies until last September, when its inspector general investigated and issued a report detailing manipulations carried out by a Nebraska lender, Nelnet… The subsidy payment issue that came to preoccupy Mr. Oberg grew out of decisions Congress made in the 1980s to ensure that low-cost student loans were available at a time when the economy was souring. Lawmakers guaranteed nonprofit lenders a rate of return of 9.5 percent on student loans that were financed by tax-exempt bonds to protect the companies from spiraling costs…

“Several big lending agencies were gaming the system,” Mr. Oberg said in a recent interview at his home in Rockville, Md…. That is when his supervisor, Mr. Whitehurst, director of the department’s Institute for Education Sciences, stepped in. Mr. Whitehurst said that he had forwarded Mr. Oberg’s memorandum to appropriate senior officials, whom he declined to identify, but acknowledged that he “wasn’t real happy” because he considered Mr. Oberg’s research to be outside his job description…

Mr. Whitehurst, in an interview, suggested that Mr. Oberg was viewed by some senior officials as an annoyance. “I was told he was like a dog on a bone, agitating on this issue,” Mr. Whitehurst said. Ms. Spellings did not reply to a memorandum Mr. Oberg sent her about waste in the loan program just before his 2005 retirement, Mr. Oberg said… 

The other day someone made an pertinent observation to us: Now we know what has driven tuition prices up 10% a year for the last 10 years… A tuition bubble?
 

Did you say “bubble”… here we go again?