WASHINGTON -- The nation's most notorious student loan maker, the Bank of Horton in rural northeast Kansas, failed yesterday and was closed, but not before its bad loans cost taxpayers $250 million.
In the late 1980s, the bank in Horton, population 2,177, was the country's second-largest originator of government-guaranteed student loans. Many of those loans were funneled to questionable trade schools and fly-by-night academies, forcing taxpayers to swallow huge losses when students didn't repay the money.
"Over the years, we probably guaranteed $500 [million] to $600 million in loans for that bank, and I guess that a full 60 to 65 percent of those loans went bad," said Val Vikmanis, president of the Higher Education Assistance Foundation, the guarantee agency that, along with taxpayers, paid for the defaults. "We wound up paying default claims on a horrendous share of those loans."