FFELP Loans: Forgiveness and Repayment Options

The Federal Family Education Loan Program (FFELP) may have concluded in 2010, but its impact persists. As of December 31, 2022, approximately 9.2 million borrowers still hold outstanding FFELP loans, amounting to a substantial $208 billion, according to the Education Department. This represents a significant 13% of the total $1.6 trillion federal student loan debt.

Established in 1965, the FFEL Program provided student loans through private and state lenders backed by the federal government. It offered various loan types, such as FFELP Stafford Subsidized and Unsubsidized Federal Stafford Loans, FFEL PLUS Loans, and Consolidated Loans.

Despite its conclusion in June 2010, giving way to the William D. Ford Federal Direct Loan Program, many borrowers still have outstanding FFELP loans.

How to Know If Your Student Loan Is a Federal Family Education Loan

To determine if you have FFELP loans, examine your federal student loans from 2010 or earlier. They could be either privately held federal student loans, i.e., commercial loans, or federally owned, i.e., Ed-owned student loans.

Visit StudentAid.gov, log in with your FSA ID, and check your loan details. Contact your student loan servicer to confirm the type of loan you hold and discuss forgiveness options.

Direct Loans vs. FFELP Loans: Understanding the Key Differences

The main difference between the Direct Loan and FFELP programs is the source of funds for borrowers. Funds for Direct Loans come from the federal government, while loans made through the FFEL program are provided by private lenders, such as banks and credit unions, and are insured by guaranty agencies and reinsured by the federal government.

In 2010, the FFEL program was discontinued, and the William D. Ford Federal Direct Loan Program became the sole federal student loan program in the United States.

Navigating the path to loan forgiveness can be complex, but there’s hope for borrowers with FFELP loans. Whether you work in public service, have made monthly payments for 20+ years, or are waiting for the outcome of the president’s debt relief plan under Supreme Court review, several opportunities for loan forgiveness are available to help you alleviate the burden of student debt.

All borrowers with FFELP loans held by the Department of Education (ED) who have accumulated time in repayment for at least 20 or 25 years will see automatic forgiveness of their loans. Other forgiveness options include:

1. Public Service Loan Forgiveness Program Waiver

Public service workers who were previously ineligible for PSLF due to their loan type can now consolidate their FFELP loans into the Federal Direct Loan Program and get credit for qualifying payments toward forgiveness.

The PSLF Waiver has eliminated nearly $40 billion in loans. MOHELA, the student loan servicer responsible for the PSLF Program, continues to process more applications.

2. IDR Waiver Application Timeline and Forgiveness Milestone Impact

The Income-Driven Repayment Waiver, a one-time account adjustment announced by President Biden, offers a comprehensive forgiveness solution for eligible borrowers.

It covers the forgiveness of remaining loan balances for those in repayment for at least 20 or 25 years, including FFELP borrowers not working in government or nonprofit organizations and those with loans held by ED, such as FFEL Consolidation Loans, Parent PLUS Loans, Federal Perkins Loans, and Health Education Assistance Loans (HEAL) Loans.

Qualifying for FFELP Loan Forgiveness Under the IDR Waiver

To qualify for FFELP loan forgiveness under the IDR Waiver after 20 years, borrowers must:

1. Borrow solely for undergraduate education,

2. Consolidate their FFEL Loans into a Direct Consolidation Loan,

3. Opt for the Revised Pay As You Earn repayment plan, and

4. Meet the eligibility criteria for the IDR Waiver.

Failing to follow these steps will result in a longer waiting period of 25 years for forgiveness under the Income-Based Repayment or Income-Contingent Repayment Plans.

Timeline for IDR Waiver Applications and Forgiveness Milestone Impact

The Department of Education initially aimed to complete IDR Waiver applications by the end of 2023, but due to staffing and resource limitations, they have extended the deadline. They now plan to begin processing IDR account adjustments this spring for those who have reached their forgiveness milestone.

The application of the IDR Waiver depends on whether borrowers reach their forgiveness milestone before or after August 1, 2023:

• If you reach your forgiveness milestone before August 1, 2023, the Department of Education expects to discharge your loans before student loan payments restart.

• If you reach your forgiveness milestone on or after August 1, 2023, you will likely have to start making payments after the payment pause ends. However, you’ll receive a refund for any payments beyond the number required for forgiveness.

Private Student Loan Forgiveness Loophole

Although private student loan borrowers are typically excluded from forgiveness, a loophole exists for those who paid off or refinanced their loans during the pandemic.

3. Navient FFELP Loan Forgiveness

Federal student loan borrowers holding Navient FFEL Loans may qualify for forgiveness if they work for the government, qualifying not-for-profit organizations (including religious ones), or have had their loans for 20 years or more. FFEL borrowers need to consolidate their loans into the Direct Loan Program before the end of the year to be eligible for the pending waiver.

Navient FFELP loans possess unique rules and repayment terms not covered by recent White House loan cancellation eligibility guidelines. Often referred to as commercial loans or privately-held federal loans, they are federal loans issued by commercial lenders (e.g., SunTrust, Chase) and backed by guaranty agencies and the federal government.

The student loan payment pause will extend until the U.S. Department of Education implements the debt relief program or resolves litigation blocking the loan forgiveness program. Payments will restart 60 days after either event. If neither occurs by June 30, 2023, payments will resume 60 days later. Borrowers will receive a notification before payments restart.

Consolidating FFELP loans offers benefits but with some caveats. Spousal consolidations and active litigation may hinder consolidation. Also, consolidating these loans into a Direct Loan can increase your principal balance due to unpaid interest capitalization and, once the IDR Waiver ends, may reset your progress toward income-driven repayment plan forgiveness.

To minimize drawbacks, start the consolidation process before the end of 2023 and utilize the one-time IDR waiver.

This waiver allows you to receive credit for time spent in a deferment or forbearance period towards IDR plan forgiveness for commercially-held FFELP loans. For federally-held FFELP loans, changes apply automatically.

If you’re eligible for one-time federal debt cancellation, avoid consolidating commercially-held FFELP student loans and Direct Loans together. Instead, consolidate FFEL loans separately into a Direct Consolidation Loan. That way, you won’t miss out on qualifying for the Biden administration’s $20 thousand debt cancellation if you received a Pell Grant. Visit Federal Student Aid to submit a consolidation application.

Applying for a Federal Direct Consolidation Loan is simple, with both online and paper form options available. There are no fees or credit checks, and the weighted average of the rates included in the consolidation determines the new fixed interest rate for the life of the loan.

Additionally, new Direct Consolidation Loans qualify for COVID relief measures under the CARES Act, including 0% interest and a pause on monthly payments.

Don’t miss your chance to get your FFEL Loans forgiven — time is running out! Although you missed out on relief under Biden’s student loan forgiveness plan, act now and apply for other relief opportunities. If you need someone to explain the details or guide you through the whole process, just reach out, and we’ll find a time to talk.

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