Just gimme a dollar and we'll call it square

That is, basically, what the U.S. department of Education told a state-owned Pennsylvania company that makes and guarantees student loans. The Inspector General of the Department of Education found that the company had received improper subsidies of $34 million, and the Ed. Dept. not only ignored the findings of their own I.G., they decided that the amount was only about $15 million, and then told the state company to repay whatever they thought they owed.

From the New York Times (1/26/08):

The Education Department has brushed aside a finding by its own inspector general that a student lender improperly received $34 million in federal subsidies, and is instructing the lender to decide for itself how much money it should pay back.

In a letter sent Friday to the Pennsylvania Higher Education Assistance Agency, a state-owned company that makes and guarantees student loans, the department said it had estimated the overpayment at only $15.1 million, and said in a separate letter that it agreed with only some of the findings of the inspector general. But it told the agency to calculate for itself the amount it thought it had overbilled the government. Any final payment would require the approval of the Education Department.

The agency “must provide a detailed explanation of its plan to identify affected loans and to calculate overpayments,” which would be deducted from future reimbursement requests, wrote Patricia Trubia, a department official, in the letter.

Keith New, a spokesman for the Pennsylvania agency, said it was “very pleased” with the department’s letter, and that it would continue to negotiate with the department over any repayment obligation.

“We could wind up with zero liability,” Mr. New said. (emphasis mine)

Department officials declined to comment on what the resolution of the case could be.

The Education Department’s inspector found in November that the Pennsylvania agency overbilled the government by $34 million under a subsidy program enacted in the 1980s to make issuing loans to students more attractive at a time of high interest rates. Congress tried to rein in the program in 1993, as rates fell, but the loans ballooned as lenders exploited a loophole to keep receiving the subsidies.

Michael Dannenberg, director of the education policy program at the New America Foundation in Washington, sharply criticized the department’s decision to seek less than the amount identified in the audit.

“The department’s going after less than half of a fraction of the larger amount of improper billing that the Pennsylvania lending agency engaged in,” Mr. Dannenberg said. “The Department of Education’s failure to aggressively police the student loan industry has hurt taxpayers and students, and this is the latest example.”

Representative George Miller, the California Democrat who is the chairman of the House Education and Labor Committee and a critic of the department’s oversight of student lending, also lashed out.

“Today’s action doesn’t erase the administration’s failure last year to recover hundreds of millions of taxpayer dollars misspent by Nelnet,” Mr. Miller said Friday in a statement, referring to the large student lender based in Nebraska. Last year the department allowed Nelnet to keep $278 million in subsidies that its inspector general had concluded were improper.

“While I am disappointed that the department is not seeking to collect the full amount recommended by the inspector general,” Mr. Miller added, “I hope that this decision is a sign that the department is finally starting to take its role as the steward of our nation’s federal student aid programs seriously.

This is another example of a seven-year-long pattern of government agencies disregarding the findings and advice of their own employees to render decisions that fly in the face of reason. Can someone please explain to me why this is so? Couldn't be politics, could it? Or payback? Or the buddy system? Or just mind-numbing incompetence?

Government for the people? No, definitely not.