Until June 30, 2010, the Federal Family Education Loan Program ( FFELP student loans )offered student loans to borrowers through private and state lenders but was backed by the federal government. In other words, if a borrower defaults, the government would compensate private companies with an interest subsidy.
During the Great Recession, the federal government acquired some lenders’ FFELP portfolios; borrowers didn’t have a choice in whether their loans were included. Now some of this debt is owned by the federal government.
According to the Education Department, despite the end of the FFEL Program, there are still about 9.2 million borrowers with outstanding FFELP loans totaling $208 billion.
Due to strung-together forbearances, defaults, and extended repayment terms due to enrolling in income-based repayment plans, this debt still exists.
How do FFELs and Direct Loans differ?
As a general rule, FFEL loans are made by private lenders and guaranteed by the federal government, while Direct Loans are originated and guaranteed by the government.
Unless you refinance your FFEL loans into a Direct Consolidation Loan, you will not be eligible for most income-driven repayment plans or loan forgiveness programs. As well as the four types of income-driven repayment plans, Direct Loans are eligible for Public Service Loan Forgiveness.
Is my loan an FFEL loan?
You may have FFEL loans if you have student loans that originated before 2010 and never consolidated or refinanced them.
You can find out what type of federal student loan you have by logging into the Federal Student Aid website or the National Student Loan Data System using your FSA ID.
Forgiveness of FFELP loans
You may be eligible for loan forgiveness if you have FFELP loans. The Income-Based Repayment Plan (IBR) is available to most FFEL borrowers. It involves paying 10 or 15 percent of your discretionary income for 20 or 25 years before your remaining loan balance is forgiven. This repayment plan is not available for FFEL loans for parents.
After you consolidate your FFEL loans, you may become eligible for income-driven repayment plans that offer loan forgiveness after 20 or 25 years of repayment. Direct Consolidation Loans can also be repaid using Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), or Income-Contingent Repayment (ICR).
By consolidating your FFEL loans, you can also qualify for Public Service Loan Forgiveness (PSLF), which forgives your remaining loan balance after 120 payments while working for a public service organization. A temporary waiver allows you to count any payments you made on your FFEL loans before consolidating (while working for an eligible employer) toward the 120-payment requirement if you consolidate and apply for PSLF before Oct. 31, 2022.
Frequently Asked Questions
Federal or private FFEL loans?
Log in to the Federal Student Aid website using your FSA ID to find out who holds and services your FFEL loan.
Is it possible to consolidate FFEL loans?
To increase your repayment options and forgiveness options, you can consolidate FFEL loans into Direct Consolidation Loans. When you consolidate to enter an income-driven repayment plan, payments made before the consolidation do not count toward the required number of payments for loan forgiveness. That’s why you should consolidate as soon as possible.
Is it possible to change my FFEL loan to a Direct Loan?
To convert your FFEL loan to a Direct Loan, you must consolidate it into a Direct Consolidation Loan. You can consolidate your FFEL loans by logging into your FSA account and selecting the loans you wish to consolidate.
Consolidation is free and usually takes between 30 and 45 days.
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