#1 Student Loan Lawyer
Updated on December 19, 2022
The Education Department owns all loans made through the Federal Direct Loan Program and some through the Perkins Loan and Federal Family Education Loan Programs. Your loans are held by Ed if they’ve been in forbearance throughout the coronavirus pandemic payment pause.
The federal government put student loan payments on ice and locked interest rates at 0% when the nation went on lockdown nearly three years ago. The Covid-19 forbearance helped tens of millions of borrowers from having to continue their monthly payments during these uncertain times. It also gave them credit toward loan forgiveness programs like Public Service Loan Forgiveness and Income-Driven Repayment Plan Forgiveness.
Related: What Is an FFEL Loan?
But not all federal student loan borrowers reaped the benefits. The payment pause only applied to those who had Ed-owned student loans. People with private student loans and federal loans owned by their school or a commercial entity weren’t eligible for debt relief.
Similarly, borrowers with those loans aren’t eligible for President Biden’s student loan cancellation plan — if it ever gets implemented.*
*Currently, Biden’s loan cancellation plan is being held up by legal challenges. Read more about this here.
What is an Ed-owned student loan?
An Ed-owned student loan is a federal student loan that the Department of Education owns. The department owns most, but not all, federal student loans. Some federal loans are owned by schools (Perkins Loans), and others are owned by state-backed lenders known as guaranty agencies (Federal Family Education Loans).
Congress ended the Perkins and FFEL Program by the mid-2010s. From Oct 1., 2017, until now, all federal student loans have been made through the Direct Loan Program. The department owns all of those loans.
Here’s where things get complicated.
Although borrowers no longer have a choice in the type of federal loan they can borrow, there are still millions of people with FFEL and Perkins Loans. The department bought some of those loans from schools and guarantee agencies after borrowers fell behind on their monthly payments and defaulted. But many FFEL and Perkins Loans are still owned by schools and guaranty agencies.
Related: Are Navient Loans Owned by Ed?
Before the pandemic, those loans weren’t eligible for the more affordable student loan repayment options the government created because they were owned by third parties — not the Education Department.
Likewise, commercially-held Perkins and FFELP Loans weren’t eligible for the payment pause or the PSLF Waiver. And, following an abrupt change to the eligibility guidelines, those loans aren’t eligible for Biden’s student debt relief plan.
Related: Do FFEL Loans Qualify for PSLF?
Does the U.S. Department of Education hold my loans?
The easiest way to tell if the Education Department holds your loans is to visit StudentAid.gov. Click on “view details,” then scroll to the bottom to see your federal student loans. If your servicer’s name begins with “DEPT OF ED,” the department owns the loan.
It’s challenging to determine who owns your loans based on which company services the student loan debt. Some companies like Navient and AES handle student loan servicing for federal and private student loans. Others like Nelnet, service Ed-held loans, and Type J student loans owned by a guaranty agency.
If you determine you have loans that the department doesn’t own, you can refinance them with the government by consolidating them into a Direct Consolidation Loan. And if you consolidate before May 1, 2023, you’ll get credit towards IDR Forgiveness for all the monthly payments you’ve made and some of the time your loans spent in long forbearances and deferments. Read more about the IDR Waiver.
If you’re not sure who owns your student loans, visit StudentAid.gov to find out. If the Department of Education doesn’t hold your debt, you might want to consider consolidating into a Direct Consolidation Loan to get on track for IDR Forgiveness. You can also schedule a time to talk with me about your loans. I’ve helped thousands of borrowers like you make a game plan to escape this situation.