Thomas Jefferson will pay $2.7M to feds over alleged misuse of student loan money

Thomas Jefferson University agreed to pay $2.7 million to settle allegations that it violated terms of a federal student loan program from 2009 to 2016 by investing some of the money in its endowment and then keeping the investment proceeds instead of using them for more loans, federal officials said Tuesday.

Jefferson admitted no liability in the settlement, announced by the U.S. Attorney for the Eastern District of Pennsylvania, involving a medical student loan program designed to increase the supply of primary care physicians.

It provided loans on favorable terms to students who agreed to work as primary care doctors for 10 years after completing their medical degrees.

Medical schools that participate in the Primary Care Loan program are supposed to create a revolving loan fund and apply any earnings on the fund to increase the amount of money available for loans.

Schools are supposed to return money not used for loans every year, according to the U.S. Attorney.

Jefferson, which includes Sidney Kimmel Medical College, returned $5.7 million in excess money in 2017.

Jefferson’s $2.7 million payment returns to the federal government investment gains that Jefferson kept for its own purposes outside the loan program, the U.S. Attorney’s office said. The U.S. Department of Health and Human Services administers the program.

Jefferson denied the allegations: “We have agreed to this civil settlement to bring this 15-year-old legacy matter to a close so that we may continue to focus upon delivery of high quality academic, research, and clinical services during highly challenging times,” the university said in an emailed statement.

“When schools agree to participate in the Primary Care Loan program, they must carefully account for these federal funds to ensure that taxpayer dollars are used for public good,” said Maureen R. Dixon, special agent in charge for the HHS Office of Inspector General.

“When a school wrongfully keeps these funds from the program, it prevents other recipients from using them to meet the primary care needs of the community,” Dixon said.

Jefferson said its handling of the loan funds followed proper accounting rules.

Separately, Jefferson this week is cutting about 1% of its workforce of more than 40,000 people as part of an effort to trim financial losses.