FFELP Loans: Forgiveness and Repayment Options

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Stanley Tate

#1 Student Loan Lawyer

Updated on March 25, 2023

The Federal Family Education Loan Program (FFELP) may have wrapped up in 2010, but its impact lingers. As of December 31, 2022, about 9.2 million borrowers still hold outstanding FFELP loans, amounting to a hefty $208 billion, says the Education Department. That’s a significant 13% of the total $1.6 trillion federal student debt.

Fortunately, outstanding FFEL loans are gradually decreasing, thanks to the one-time government waivers rolled out by the Biden administration during the pandemic.

FFELP Loans, like Stafford Loans, can be forgiven if you work in public service, make monthly payments for 20+ years, or qualify for the president’s debt relief plan, which is on hold with the Supreme Court.

FFEL Loan forgiveness options

It remains to be seen whether President Biden’s plan to forgive up to $20,000 in student loan debt for Pell Grant recipients and $10,000 for millions of others will withstand a legal challenge currently before the Supreme Court. But FFELP borrowers still have opportunities to eliminate their federal student loan balance through two other initiatives.

Public service workers: PSLF Waiver

Public service workers, previously denied forgiveness due to the wrong loan types, consolidated their FFELP loans into the Federal Direct Loan Program before last Halloween. This let them qualify for Public Service Loan Forgiveness (PSLF).

The PSLF Waiver has already wiped out nearly $40 billion in loans, and more relief is coming. MOHELA, the student loan servicer in charge of the PSLF Program, is still processing hundreds of thousands of applications.

Debt cancellation for non-government and nonprofit workers

You can also find debt cancellation if you’re an FFELP borrower not working full-time in government or nonprofit organizations. President Biden announced a one-time account adjustment when he extended the payment pause in April. The U.S. Department of Education will clear the remaining loan balances for borrowers in repayment for at least two decades.

The IDR Waiver offers retroactive credit toward income-driven repayment plan forgiveness for time spent in repayment, regardless of the repayment plan or payment status, and some deferment and long forbearance periods.

Automatic forgiveness for certain borrowers

All borrowers with loans held by ED, who have built up time in repayment for at least 20 or 25 years, will see automatic forgiveness of their loans. This includes those with FFEL Consolidation Loans, Parent PLUS Loans, Federal Perkins Loans, and Health Education Assistance Loans (HEAL) Loans.

Those with private student loans are permanently locked out. But there’s a loophole to qualify for private student loan forgiveness if you paid off or refinanced your loans during the pandemic.

IDR Waiver application timeline

The Department of Education first aimed to complete the IDR Waiver application by the end of 2023. Unfortunately, the deadline has been pushed back several times. The probable cause for these delays is the inadequate amount of staff and resources. The federal government hasn’t boosted its budget to accommodate all these initiatives simultaneously.

Forgiveness process begins soon

In a recent update on the Federal Student Aid website, the Education Department revealed plans to start erasing the balances of borrowers it determined to have enough qualifying credit for forgiveness this spring.

New date for account adjustment

The Education Department will start processing the IDR account adjustment this spring.

FFEL Loans and Biden’s student loan forgiveness plan

At first, many FFEL borrowers weren’t eligible for President Biden’s debt relief plan, as only those with Ed-owned student loans (loans owned directly by the Education Department) qualified.

Education Secretary Miguel Cardona then announced that relief would be opened up to all borrowers with FFELP student loans, including those with privately-held FFEL Loans. The catch? They needed to refinance their loans with the federal government by consolidating their loans into a Direct Consolidation Loan.

September 29, 2022: Change of plans

But on September 29, 2022, after six Republican-led states sued to block the forgiveness opportunity, the department changed its mind again. FFEL borrowers who hadn’t applied to consolidate their loans into the Direct Loan Program by September 28 were locked out of it.

Deadline for debt cancellation

If you submitted a consolidation application before that date, you have until the end of next year, December 31, 2023, to apply for debt cancellation — assuming the justices approve the plan.

Thumbnail of YouTube video about student loan forgiveness.

Student Loan Forgiveness Simplified: Top 3 Tips from an Expert

FFELP Loan forgiveness after 20 years

To get FFELP Loans forgiven after 20 years, you need to:

1. Borrow only for undergraduate education,

2. Consolidate FFEL Loans into a Direct Consolidation Loan,

3. Choose the Pay As You Earn or Revised Pay As You Earn repayment option, and

4. Be eligible for the IDR Waiver.

If you don’t follow these steps, you’ll have to wait 25 years for forgiveness under the Income-Based Repayment or Income-Contingent Repayment Plans.

Will Navient FFELP Loans be forgiven?

Navient FFEL Loans can be forgiven for federal student loan borrowers employed by the government or qualified not-for-profit organizations, including religious ones, or those who’ve had their loans for two decades or more.

To qualify, though, you’ll need to consolidate these loans into the Direct Loan Program. Navient FFELP loans are federal loans from a terminated program with unique rules and repayment terms that fall outside recent White House loan cancellation eligibility guidelines.

Related: Borrower Defense School List

Find out if you have an FFEL Loan

If your federal student loans are from 2010 or earlier, they’re likely FFELP loans. The federal government holds some, but most are privately owned and handled by companies like AES, Navient, and Nelnet.

To check if you have FFEL Loans, follow these simple steps:

1. Visit StudentAid.gov and log in using your FSA ID.

2. Click on “My Aid” under your name.

3. Find information about your federal loan amounts on that page.

4. See if your loans are listed as Direct loans or FFEL Loans. If they’re listed as FFELP Loans, then they’re FFEL Loans.

By following these steps, you’ll easily determine whether you have FFEL loans. If you need further help or have questions, please contact your loan servicer or the Federal Student Aid Information Center.

Understanding FFEL Loans

The Federal Family Education Loan Program used to offer federally backed student loans through private lenders. Starting in 1965, it helped millions of students until it ended in 2010, giving way to the William D. Ford Federal Direct Loan Program.

Students could access various loan types, like Subsidized and Unsubsidized Federal Stafford Loans, FFEL PLUS Loans, and Consolidated Loans. At its height in 2007-08, the program lent a whopping $54.7 billion to 6.5 million students and parents. But scandals hit the industry, with lenders like Sallie Mae accused of overcharging the government and breaking laws.

Related: Do Stafford Loans Qualify for PSLF?

In 2010, Congress put an end to the FFEL program. Now, the US Department of Education directly issues federal loans through the Federal Direct Student Loan Program.

Curious about which banks, financial institutions, and companies handle FFEL Loans? Here’s a list of the top FFEL lenders as of December 2020.

FFELP Loans vs Direct Loans

An FFELP Loan is not a Direct Loan. FFELP Loans and Direct Loans are distinct in how they’re funded. Direct Loans come straight from Uncle Sam, while FFELP loans were dished out by private lenders, backed by guaranty agencies and the federal government.

William D. Ford Direct loans are like a direct deposit from the Department of Education to students. Though the FFEL program, which wrapped up in July 2010, shared some similarities with Direct Loans, it had a few unique twists in repayment options. Those differences have resulted in the different treatment FFEL borrowers received during the Coronavirus pandemic.

Related: Should I Consolidate My FFEL Loans to Direct Loans?

Consolidation and FFELP Loans

Consolidating FFELP loans can be beneficial, but there are some caveats. For example, spousal consolidations and active litigation might stop you from consolidating. Also, consolidating these loans into a Direct Loan can increase your principal balance due to unpaid interest capitalization and may restart your progress toward income-driven payment forgiveness.

To reduce the drawbacks, consolidate before the end of 2023 and use the one-time IDR waiver. This waiver helps you get credit for time spent in forbearance or deferment towards income-driven forgiveness for commercially held FFELP loans. For federally-held FFELP loans, the changes are automatic.

If you’re eligible for one-time federal debt cancellation, don’t consolidate commercially-held FFEL loans and Direct Loans together.

Instead, consolidate the FFEL loans separately into a Direct Consolidation Loan. Visit Federal Student Aid for more details on debt cancellation and loan consolidation.

Applying for a Direct Consolidation Loan is easy, with online and paper form options available. There are no fees or credit checks, and the weighted average of consolidated loans’ rates determines the interest rate. Plus, new Direct Consolidation Loans qualify for COVID relief measures under the CARES Act, including 0% interest and a pause on monthly payments.

Bottom Line

Don’t miss your chance to get your FFEL Loans forgiven — time is running out! Act now and apply for 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.

UP NEXT: When Do Student Loan Payments Resume?

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