Pennsylvania and Vermont Student-Loan Agencies’ Suit Revived

Pennsylvania and Vermont student-loan agencies must face false-billing claims brought in 2007 by a former U.S. Education Department employee, a federal appeals court ruled, reviving the whistle-blower lawsuit.

The Pennsylvania Higher Education Assistance Agency and theVermont Student Assistance Corp. aren’t subject to sufficient state control to protect them from suits under the U.S. False Claims Act, a federal appeals court in Richmond, Virginia, ruled today, vacating a lower-court decision.

The lenders were among a group sued by Jon Oberg under the law, which lets private citizens file on behalf of the government and share in a recovery.

“We recognize that some of Dr. Oberg’s allegations test the outer bounds of the plausibility standard, but at this juncture, we must construe all facts in the light most favorable to the plaintiff,” the appeals court said.

Oberg sued lenders over claims they created billing systems that allowed them to get inflated government subsidies on a special class of student loans. The subsidies guaranteed nonprofit lenders a 9.5 percent return on loans financed by tax-exempt bonds. Congress ended the program for new loans in 1993.

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