Special Allowance Payments to Sallie Mae’s Subsidiary, Nellie Mae, for Loans Funded by Tax-Exempt Obligations

Submitting OIG:

Report Description:

We found that SLMA’s billing for its NLMA subsidiary for SAP under the 9.5 percent floor, complied with the TTPA and HERA. However, SLMA’s billing for NLMA did not comply with other requirements for the 9.5 percent floor calculation. Specifically, SLMA continued to bill loans under the 9.5 percent floor after the eligible tax-exempt bonds, from which the loans derived their eligibility for the 9.5 percent floor, had matured and been retired, and after the loans were refinanced with funds derived from ineligible sources. We estimate that this noncompliance resulted in special allowance overpayments of about $22.3 million.

Date Issued:

Monday, August 3, 2009

Agency Reviewed / Investigated:

Department of Education

Submitting OIG-Specific Report Number:

A03I0006

Component, if applicable:

Federal Student Aid

External entity, if applicable:

Sallie Mae, Inc

Location(s):

Reston, VA

United States

Type of Report:

Audit

Questioned Costs:

$22,378,905

Funds for Better Use:

Number of Recommendations:

View Document:

Attachment	Size
a03i0006.pdf	998.15 KB

Additional Details Link:

https://www2.ed.gov/about/offices/list/oig/auditreports/fy2009/a03i0006.pdf

Recommendation Number	Recommendation Status	Significant Recommendation
1.1	Open	Yes
We recommend that the Chief Operating Officer for Federal Student Aid instruct SLMA to adjust its special allowance billings for loans associated with Bond 93F that became ineligible for the 9.5 percent floor calculation, as described in the finding, and return all overpayments to the Department (for which we estimate to be about $12.3 million).
1.2	Open	Yes
We recommend that the Chief Operating Officer for Federal Student Aid instruct SLMA to identify the loans associated with Bonds 93B, 93G, and 93H that became ineligible for the 9.5 percent floor calculation, as described in the finding, and adjust its special allowance billings for the affected loans in the quarters ended June 30, 2002, through June 30, 2005, and return all overpayments to the Department (for which we estimate to be about $10 million).
1.3	Open	Yes
We recommend that the Chief Operating Officer for Federal Student Aid instruct SLMA to disclose any other instances, at any of its subsidiaries (e.g., NLMA, Southwest Student Services Corporation, Student Loan Funding Resources, Student Loan Finance Association), of loans billed under the 9.5 percent floor calculation after the eligible taxexempt bond issue matured and after the loans were refinanced with funds derived from an ineligible funding source and, if necessary, adjust its special allowance billings for all affected loans and return all overpayments to the Department.

Recommendation Number

Recommendation Status

Significant Recommendation

Additional Details

1.1

Open

Yes

We recommend that the Chief Operating Officer for Federal Student Aid instruct SLMA to adjust its special allowance billings for loans associated with Bond 93F that became ineligible for the 9.5 percent floor calculation, as described in the finding, and return all overpayments to the Department (for which we estimate to be about $12.3 million).

1.2

Open

Yes

We recommend that the Chief Operating Officer for Federal Student Aid instruct SLMA to identify the loans associated with Bonds 93B, 93G, and 93H that became ineligible for the 9.5 percent floor calculation, as described in the finding, and adjust its special allowance billings for the affected loans in the quarters ended June 30, 2002, through June 30, 2005, and return all overpayments to the Department (for which we estimate to be about $10 million).