FOR IMMEDIATE RELEASE                                         CIV
TUESDAY, JULY 8, 1997                              (202) 616-2765
                                               TDD (202) 514-1888

     WASHINGTON, D.C. -- First Tennessee Bank, National
Association, (FTB) will pay the United States $2.75 million to
settle allegations it deceived the Department of Education to get
federal insurance on defaulted student loans, the Department of
Justice announced today.  The agreement settles a suit alleging
that FTB falsified its effort to collect the loans before billing
a federal program.

     Assistant Attorney General Frank W. Hunger in charge of the
Civil Division said the agreement settles the lawsuit the
Department filed against FTB in U.S. District Court in Knoxville,
Tennessee, in 1994.  FTB is headquartered in Memphis, Tennessee.

     "The suit and the settlement should send a clear and
powerful message to those participating in the student loan
program that the government will take vigorous action against
lenders who falsify information to obtain a federal guaranty,"
Hunger said.  

     In addition to the $2.75 million paid in this settlement,
FTB previously repurchased more than $200,000 of the loans and
the Education Department and the Internal Revenue Service have
collected nearly $1 million from the defaulted borrowers

     In its suit, the Department said FTB submitted false claims
to the Department of Education in 1987 and 1988 to receive
federally-guaranteed insurance payments under a program that made
low interest loans to students to pay for their education at
post-secondary schools. 
     Under the program, lenders provided their own funds to
eligible students.  The loans were initially insured against loss
by state or private nonprofit guarantee agencies under the
Department of Education's reinsurance program. 
     Prior to making a default claim for insurance, however, the
lender was required to make certain minimum efforts to collect on
delinquent loans. 
     The Department, in its suit, said FTB did not make the
required collection efforts, but, instead, submitted fabricated
collection histories to collect insurance on more than $1.3
million in loans.  The bank also forged documents on more than
$200,000 in other loans.  

     By falsifying the collection histories, FTB misrepresented
its collection efforts and thereby submitted false claims for
insurance, the Department claimed in its complaint.

     The government's suit, United States of America v. First
Tennessee Bank, National Association, No. 3:94 CV 323  (E.D.
Tn.), accused the bank of violations of the False Claims Act. 

     The case was investigated by the Atlanta, Georgia, office of
the Department of Education's Office of Inspector General.