FFEL Loans are eligible for PSLF, but only after they are consolidated into a new federal Direct Consolidation Loans. FFEL Loans were a type of federal student loan made under the Federal Family Education Loan Program. The FFEL Program ended on June 30, 2010, and was replaced by the Direct Loan Program. However, there are still over 11 million borrowers with outstanding FFEL student loan debt totaling over $248 billion, according to the most recent data from the Education Department.
Thankfully, some of those borrowers are starting to get relief. Recently, the Department of Education announced temporary changes to the PSLF program that allow borrowers with FFEL loans who've worked full-time in public service jobs to qualify for loan forgiveness. So far, about 10 thousand borrowers have gotten over $715 million in student loan forgiveness under this waiver.
Here's how you can join them and make your FFEL Loans eligible for PSLF.
Are FFEL loans eligible for PSLF?
FFEL Loans are eligible for PSLF, but only after you consolidate the loans into a federal Direct Loan. After consolidation, the FFEL Loans will become a new loan eligible for the Public Service Loan Forgiveness Program and other repayment options like the Revised Pay As You Earn (REPAYE).
For a limited time, the U.S. Department of Education is allowing monthly payments made on FFEL Loans to count toward PSLF. To benefit from this limited waiver opportunity, you'll need to follow three steps:
- Step 1 - Consolidate your FFEL Loans: You can consolidate your loans for free at the Federal Student Aid website, studentaid.gov. If you previously consolidated your loans into an FFEL Consolidation Loan, you can consolidate the loan a second time — even if you don't have another eligible loan — into a Direct Loan. You can also consolidate any federal Perkins Loans you have. Learn how to consolidate student loans for PSLF.
- Step 2 - Apply for income-driven repayment: Under the PSLF eligibility requirements, you have to make 120 qualifying payments under the Standard Repayment Plan or one of the income-driven repayment plans (IBR, ICR, PAYE, and REPAYE). The limited waiver gives you retroactive credit toward PSLF for payments made on your FFEL Loan under any student loan repayment program.
- Step 3 - Certify qualifying employment: Submit a PSLF Employment Certification Form for every full-time job you had with the government or non-profit organization from October 1, 2007 - present.
Once you've taken those steps, the Department of Education will review your payment history and give you an updated payment account. According to the PSLF Reddit thread, some borrowers have already received an updated payment count. And some have even gotten their loan balance forgiven.
Note: The Education Department recently announced that MOHELA will take over the processing of PSLF applications in 2022. All borrowers currently in the program will remain with FedLoan Servicing until they are transferred to MOHELA later this year.
You have until October 31, 2022, to take advantage of the PSLF Limited Waiver Opportunity.
Learn More: Reddit student loan questions and answers
Which FFEL Loans are eligible for PSLF?
After consolidation, the following FFEL Program Loans are eligible for PSLF:
- Stafford Loans - Subsidized and Unsubsidized Loans
- FFEL PLUS Loans
- FFEL Parent PLUS Loans
- FFEL Consolidation Loans
Unfortunately, borrowers with FFEL Spousal Consolidation Loans can't take advantage of the PSLF Program because those types of loans can't be consolidated into a Direct Consolidation Loan. Refinancing with a private lender is the only option to try and get rid of that student debt.
Why FFEL loans receive different treatment
Why are FFEL Loans not automatically eligible for PSLF? The answer lies in the history of FFEL Loans.
FFEL Program loans were made by private banks and state-based lenders and were guaranteed by the federal government. The guarantee meant that if a borrower defaulted or had their debt canceled, the federal government would step up and cover the lender for its loss. Although the loans were made by non-government lenders, FFEL Loans are federal loans, not private student loans.
During the 2008 recession, the Department of Education purchased some FFEL portfolios. Borrowers with FFEL Loans had no control over whether their loans were included.
Following the sale, FFEL Loans were split into two groups:
- FFEL Loans that were held by the Department of Education
- FFEL Loans that remained held by commercial lenders
Unfortunately, the loans held by commercial lenders receive different treatment than the FFEL Loans held by the Education Department. The commercial FFEL Loans didn't qualify for the coronavirus forbearance. As a result, those borrowers did not:
- have their interest rate set to zero — interest kept accruing
- receive a payment freeze — they had to keep making student loan payments
- get automatic credit towards loan forgiveness — they had to make payments to receive credit towards repayment plan forgiveness and PSLF.
Options if your FFEL Loans don't qualify for PSLF
FFEL Loan borrowers that don't qualify for PSLF because they haven't worked in public service still have options to get rid of their remaining balance. Depending on your situation, you may be eligible for:
- Repayment plan forgiveness - after you make 240 or 300 monthly payments under the income-based or income-contingent repayment plan.
- Total and Permanent Disability Loan Discharge - you must have a physical or mental ailment that leaves you unable to engage in substantial gainful employment for a prolonged period.
- Death discharge - federal student loan debt is forgiven when the loan borrower dies. Parents with FFEL or Direct PLUS Loans they borrowed to cover their child's higher education can have their balance forgiven if their child dies.
- Teacher Loan Forgiveness - you qualify after teaching five consecutive years at a low-income elementary or secondary school.
Need help with PSLF for FFEL Loans? Let's talk
The different loan repayment plans and forgiveness options for FFEL Loans can seem dizzying. But that's why I'm here to help. For years, I've helped people like you develop strategies for their federal and private student loans.
Schedule a free 10-minute call with me today. We'll work together to develop a plan that fits your current financial situation and sets you up to meet your future goals.