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Court reinstates claims against 2 student lenders

Thursday - 3/13/2014, 5:18pm  ET

RICHMOND, Va. (AP) -- A federal appeals court has reinstated a whistleblower's claims that student loan companies in Pennsylvania and Vermont cheated the U.S. government.

Former Education Department employee Jon Oberg claims the companies violated the False Claims Act by overstating the student loan subsidies they were entitled to receive. A judge dismissed the lawsuit, saying the Pennsylvania Higher Education Assistance Authority and the Vermont Student Assistance Corporation are essentially extensions of state government and therefore cannot be sued under the False Claims Act.

A three-judge panel of the Richmond-based 4th U.S. Circuit Court of Appeals disagreed. It ruled Thursday that the companies are not exempt because they have substantial autonomy.

However, the panel agreed with the judge that the Arkansas Student Loan Authority is exempt because it is firmly controlled by the state.


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