What is FFELP Student Loan?

FFELP student loans are government guaranteed loans originally funded by private companies. The FFELP ended with the 2009/2010 academic year to make way for direct loans, some of which were purchased by the federal government. There are two types of FFELP loans: Department of Education owned and Commercially-owned.

Borrowers with FFELP student loans may want to consolidate to take advantage of more student loan benefits, including Public Service Loan Forgiveness and Revised Pay As You Earn income-driven repayment.

What is FFELP Student Loan?

The Federal Family Education Loans Program, or FFEL program, provided student loans to borrowers until June 30, 2010. FFELP loans were made by private and government lenders, but guaranteed by the federal government. This means that if a borrower defaults, the state pays private companies an interest subsidy to compensate for the loss.

The federal government bought FFELP student loan portfolios from some lenders during the Great Recession. FFEL borrowers had no choice whether or not to include their loans in the purchases. Now some of that debt belongs to the government.

Although the federal government ended the FFELP student loan program, there are still 11.2 million borrowers with outstanding FFEL loans totaling more than $248 billion, according to the most recent data from the Department of Education. Experts say the debt still exists due to a series of defaults, forbearances, and extended terms due to enrollment in the income-based repayment plan. All federal student loans now come from the direct loans program.

How to Know if You Have Federal Family Education Loans Program?

If you have federal student loans from 2010 or earlier, they are probably FFELP loans. Some outstanding FFEL loans are held by the federal government (called ED-held FFEL loans), but most are still held by private companies like Navient.

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Visit studentaid.gov to find out what type of student loan you have and whether it’s from the federal government or a private company.

What Payment Options Do I Have?

Unconsolidated FFELP student loans qualify for:

  • Income-Based Repayment and forgiveness
  • CARES Act interest and payment pause if held by the federal government
  • Deferment and forbearance of student loans
  • Pandemic aid for FFELP borrowers

The Department of Education has provided interest and collections relief to commercially-owned FFELP borrowers whose loans are in default. The relief measure applies retroactively to March 13, 2020 and expires after September 30, 2021. If a borrower’s wages or tax refunds were garnished during this time, you can expect that money be reimbursed.

What else does the relief measure do?

  • Borrowers who have made voluntary payments on these loans can request repayment of these sums.
  • Guarantee agencies that have FFELP student loans in default are instructed to put in place a 0% interest rate for borrowers.
  • All loans that defaulted during the pandemic will be restored to good condition.
  • The department will ask the credit bureaus to remove the deficiency from your credit history.
  • The relief does not apply to FFELP student loans from companies that are not in default.

Are FFELP Student Loans Eligible for PSLF?

FFELP student loans are not eligible for:

  • PSLF (Public Service Loan Forgiveness)
  • Income-Contingent Repayment
  • Revised Pay As You Earn
  • Pay As You Earn

To access these programs, you must consolidate FFELP student loans into a Federal Direct Loan.

In October 2021, the Department of Education announced a limited waiver that would allow FFELP loan payments to count towards PSLF. To qualify for limited relief, borrowers with FFELP student loans must consolidate their loans into Federal Direct Loans and then submit a PSLF form by October 31, 2022. Any payments made after 2007 on your FFELP loans will be retrospectively counted towards PSLF.

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Should (or Can I) Consolidate my FFELP Student Loan?

You cannot consolidate your FFELP student loan into a direct loan if you have already completed marriage consolidation or if there is active litigation or a court judgment against you. If you qualify for consolidation, there are still compensations. Consolidating FFELP loans into a direct loan capitalizes any unpaid interest and increases the principal amount of your loan. Consolidation will also erase any progress you have made towards paying income-driven payment forgiveness.

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