FFELP Stafford Subsidized and Unsubsidized Loans

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Stanley Tate

#1 Student Loan Lawyer

Updated on September 23, 2022

FFELP Stafford Loans are federal student loans made under the Federal Family Education Loan Program. Before the government ended the program in 2010, the Education Department offered two types of FFELP, or FFEL, Loans: Stafford Subsidized Loans and Stafford Unsubsidized Loans. If you take out a federal student loan now, you’ll get a loan from the Direct Loan Program.

Direct Loans are eligible for the latest student loan forgiveness programs authorized by the Biden administration, including President Biden’s targeted relief for borrowers earning less than $125 thousand a year.

Stafford Loans qualify for many of those same opportunities, but some borrowers will need to consolidate their FFEL Loans into a Direct Consolidation Loan to access those benefits.

Ahead, keep reading to learn more about FFELP Stafford Loans, including how you can get them forgiven.

Related: How to Apply for Student Loan Forgiveness

What type of loan is a Stafford Loan?

Stafford Loans were a type of loan students could borrow from the federal government to help pay for their cost of attendance in college or at a trade school. Before the FFEL Program ended in July 2010, people could take out a subsidized Stafford Loan — the government pays the interest while the student’s in school — or an unsubsidized Stafford Loan — the borrower pays all of the interest during the life of the loan. Interest grows faster on unsubsidized Stafford Loans because the accrued interest is added to the principal loan balance when the student leaves school, causing the borrower to pay interest on interest.

No new Stafford Loans have been made since 2010. But there are still millions of Americans with balances remaining on these loans.

Related: Type J Student Loan Forgiveness

Direct Loan vs. Stafford Loan

Direct Loans and Stafford Loans are essentially the same type of loan: a federal loan made to an undergraduate student without a credit check or cosigner. The main difference between the two is the lender. Direct Loans are made by the Education Department directly to students. Stafford Loans were made to students by banks, credit unions, and other private lenders. The federal government guaranteed the loan if the borrower fell behind on monthly payments and defaulted.

Related: What is an FFELP Loan?

Stafford Loans were replaced by Direct Subsidized and Unsubsidized Loans when the FFEL Program ended in the summer of 2010. Still, many people and schools informally use the term “Stafford Loan” to refer to loans made under the Direct Loan Program — i.e., Direct Stafford Loans. But those aren’t the official names for Direct Subsidized Loans and Direct Unsubsidized Loans.

Federal Direct Loans can be made to undergraduate and graduate students/professional students attending school at least half-time. There are annual and aggregate loan limits that control the total amount you can borrow to pay for school. Loan payments start after you drop below half-time enrollment. But you’ll have a six-month grace period to give you time to prepare for your first payment.

Stafford Loan vs. Pell Grant

Federal Stafford Loans and Pell Grants are types of federal student aid. The main difference between the two is that borrowers must repay Stafford Loans. Pell Grants don’t need to be repaid. There’s no interest rate or repayment period. They are a grant of money given to undergraduate students who can demonstrate financial need according to their Free Application for Federal Student Aid (FAFSA).

Do Stafford Loans qualify for loan forgiveness?

Stafford Loans qualify for different loan forgiveness programs like President Biden’s plan to cancel up to $20 thousand worth of federal student loans for millions of people. But borrowers with Stafford Loans typically need to consolidate those loans into a Direct Consolidation Loan to make them eligible for cancellation and forgiveness.

How do you know if I need to consolidate? If you haven’t had to pay your Stafford Loans throughout the pandemic because they were eligible for the payment pause, you won’t need to consolidate. But if they weren’t eligible for the freeze, your loans are commercially-held FFEL Loans that must be consolidated into a Direct Loan before they’re eligible for the latest forgiveness opportunities the Education Department is offering borrowers. Visit the Federal Student Aid website, studentaid.gov, to consolidate.

Stafford Loan Forgiveness Programs

Here are the three main loan forgiveness opportunities for Stafford Loans:

President Biden’s mass debt cancellation plan will knock off $10 thousand for borrowers who didn’t get a Pell Grant, a type of financial aid made available to low-income undergraduate students, and $20 thousand for those who did. The relief is limited to borrowers who had less than $125 thousand or married couples earning less than $250,000.

Parent PLUS Loans and Perkins Loans are also eligible for cancellation, but private student loans aren’t eligible.

The U.S. Department of Education will determine your eligibility by looking at the adjusted gross income on your tax return for either 2020 or 2021, whichever is lower. Read more about the $20k student loan forgiveness.

The Limited Public Service Loan Forgiveness Waiver allows people who’ve worked full-time for the government or a nonprofit anytime after Oct. 1, 2007, to get credit towards PSLF. If you have an FFEL Stafford Loan, you’ll need to consolidate it into a Direct Loan before Oct. 31, 2022, to qualify for the waiver. Read more about the PSLF Waiver.

Income-driven repayment plan forgiveness writes off your remaining balance after 20+ years of making monthly payments under an IDR Plan. Later this year, the Education Department will use a one-time waiver and adjustment to retroactively credit millions of borrowers with additional payments toward IDR forgiveness.

Borrowers will get credit for the payments they made — no matter which payment plan they were in at the time. The department will also count months spent on deferment — except in school deferment — before 2013 as qualifying payments. And it will count forbearances of 12 straight months or more and 36 cumulative more or more toward forgiveness, both income-driven repayment, and the Public Service Loan Forgiveness program. Read more about the IDR Waiver.

Related: PSLF Forbearance Steering

Bottom Line

FFEL Stafford Subsidized and Unsubsidized student loans can be forgiven, but you may need to consolidate before that can happen. Let’s talk if you have questions about how to maximize your forgiveness options.

UP NEXT: Do FFEL Loans Qualify for PSLF?

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