How to get student loan forgiveness if you have an FFELP loan
The Federal Family Education Loan Program was one of the first student loan programs in the United States. While the program ended on July 1, 2010, many borrowers still have FFEL loans. In fact, FFEL loans still make up about 15 percent of outstanding federal student debt.
get student loan forgiveness if you have an FFELP loan
In the past, borrowers with FFEL loans had to jump through hoops to qualify for loan forgiveness. Thanks to recent changes from the Biden administration, it will be easier for borrowers with student debt to qualify for relief. FFEL loans qualify for relief through the Public Service Loan Forgiveness Program, but the deadline to apply for forgiveness is October. 31, 2022. Read below to see how the new rules work.
What is a FFEL student loan?
FFEL (sometimes abbreviated FFELP) was a loan program that allowed private lenders to disburse federal student loans. FFEL William d. Ford differs from the Federal Direct Loan Program, where the U.S. The Department of Education makes student loans directly to borrowers and contracts with third-party student loan servicers to service those loans.
Although the program no longer exists, many FFEL borrowers are still in arrears on their student loan.
Are FFEL Loans Federal or Private?
Although private loan companies administer FFEL loans, they are still federal student loan. This means that FFEL borrowers are eligible for many federal benefits and benefits, such as some income-based repayment plans, extended deferment and forbearance periods, and loan forgiveness options.
What is a FFEL loan?
FFEL (sometimes abbreviated FFELP) was a loan program that allowed private lenders to disburse federal student loans. FFEL William d. Ford differs from the Federal Direct Loan Program, where the U.S. The Department of Education makes student loans directly to borrowers and contracts with third-party loan servicers to service those loans.
Although the program no longer exists, many FFEL borrowers are still in arrears on their loans.
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Are FFEL Loans Federal or Private?
Although private loan companies administer FFEL loans, they are still federal loans. This means that FFEL borrowers are eligible for many federal benefits and benefits, such as some income-based repayment plans, extended deferment and forbearance periods, and loan forgiveness options.
Loans Federal or Private
What was the FFEL program?
The Federal Family Education Loan Program, or FFEL Program, provides student loans to borrowers as of June 30, 2010. FFELP loans are made by private and state lenders but guaranteed by the federal government. It means that if the borrower defaults, the government will pay interest subsidies to private companies to cover the losses.
During the Great Depression, the federal government purchased the FFELP portfolios of several lenders. FFELP borrowers did not have a choice as to whether or not their loan was included in the purchase. Now some of this debt is owned by the government.
Although the federal government ended the FFEL program, there are still 11.2 million borrowers with outstanding FFELP loans totaling more than $248 billion, according to the most recent data from the Department of Education. Experts say the debt still exists as a result of forbearance, default and extended terms simultaneously due to enrollment in an income-driven repayment plan.
Are FFEL loans eligible for loan forgiveness?
In the past, FFEL loans were not eligible for public service loan forgiveness or loan forgiveness through most income-based repayment plans. Only Direct Loans qualified, so FFEL borrowers had to consolidate their loans into a Direct Consolidation Loan if they wanted to pursue the forgiveness program.
But these waiver programs require you to pay for certain years. Borrowers who consolidated their loans had to start over with their repayment timelines. Even if borrowers have been making payments on FFEL loans for 10 years, they still have to make 10 more years of payments to be eligible for public service loan forgiveness after consolidation.
However, in 2021, the Department of Education issued temporary regulations for the Public Service Loan Forgiveness Program. Now, any payments made while working under a qualifying employer will count retroactively toward PSLF — even if you had an FFEL loan at the time of making those payments.
To qualify for this limited forgiveness, you must pay off that loan on Oct. Must consolidate by 31, 2022. If you apply before the deadline, you can count payments toward PSLF retroactively. If you miss the deadline, those past payments will not count toward the repayment plan. You may still be able to apply for PSLF, but only future payments will count.
You may have heard that the Biden administration is expanding between $10,000 and $20,000 of student loan forgiveness for people with annual incomes below $150,000. However, this program only applies to FFEL loans held or consolidated by the Department of Education.
Other Ways to Repay FFEL Loans
If you have an FFEL loan and want to see what your options are outside of the standard 10-year plan, consider one of the options below. These options will not be affected by the October 31 deadline for the PSLF Waiver Scheme.
Income based repayment plan
FFEL loans are eligible for several income-driven repayment plans, which reduce your monthly payments to a percentage of your income. If you don’t want to consolidate your FFEL loans, you can apply for an income-based repayment plan, which will set your repayments at 15 percent of your discretionary income for 25 years.
If you consolidate your FFEL loans into a Direct Consolidation Loan, you’ll be eligible for Pay As You Earn, Improved Pay As You Earn, and Income-Contingent Payments. These programs have different payment percentages and payment terms.
Your remaining loan balance is forgiven at the end of the income-driven repayment plan. But keep in mind that you will need to make payments for 20 or 25 years on these plans. Because of this, you will stay in debt longer than if you stick to a standard payment plan.
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Other federal payment plans
In addition to the standard payment plan, the federal government offers extended and graduated payment plans. This results in lower monthly payments than the standard plan. Your FFEL loans need to be consolidated to qualify for these plans.
federal payment plans
An extended plan has a 25-year term, and payments can be fixed or graduated. A graduated repayment plan has a 10- to 30-year repayment period, and payments will start low and increase every two years.
The main difference between these plans and the income-driven repayment plan is that there is no loan waiver at the end of the term. Also, borrowers often pay more interest under these schemes.
Refinancing
Refinancing your FFEL loan can result in a lower interest rate, which can lead to lower interest payments over the life of the loan. Before the FFEL program ended, the interest rate for subsidized FFEL loans was 5.6 percent, and the interest rate for unsubsidized FFEL loans was 6.8 percent. Nowadays, you can find private lenders that offer much lower rates.
The downside of refinancing is that you lose access to income-driven repayment plans and federal forbearance options. That’s because you’ll need to refinance with a private lender. Weigh the pros and cons and see which option suits your current financial situation.
Bottom line
If you have FFEL loans and are seeking student loan forgiveness, you will need to consolidate your loans through a Direct Consolidation Loan. You can then apply for public service loan forgiveness or an income-based repayment plan, although it may take a few years for your balance to be forgiven.
If you are interested in Public Service Loan Forgiveness, act fast. The government’s limited waiver is only open until October 31, 2022, and it’s best to apply early to allow enough time for the process.
Are FFELP Loans Eligible for Cancellation?
President Biden announced plans to cancel $20,000 of student loan debt per borrower with less than $125,000 for individual filers and $250,000 for joint filers. Qualified borrowers will receive $20,000 in discharge if they are Pell Grant recipients and $10,000 if they are not.
Federally owned FFELP loans are eligible for this cancellation; If your payments have been suspended, you are eligible.
Commercially owned FFELP loans will be eligible if borrowers have applied to consolidate by September 29, 2022. Borrowers with commercial FFELP student loan who also have Direct Loan Program loans are eligible for cancellation only for their Direct Loans. This was in contrast to previous guidance regarding the foreclosure eligibility of commercially owned FFELP loan. More than 4 million borrowers have commercial FFELP debt. Contact your servicer to confirm what type of FFELP loan you have.
More relief efforts may be possible, but the Education Department has not released any details to suggest a plan.
Are FFELP loans eligible for PSLF?
FFEL loans are not eligible for:
- Public Service student Loan Forgiveness, or PSLF.
- Pay as you earn.
- Revised salary as you earn.
- Income-contingent payment.
To access these programs, you must consolidate an FFELP student loan into a Federal Direct student Loan.
In October 2021, the Department of Education announced a limited waiver that would allow payments on FFEL loans to count toward PSLF. To take advantage of limited forgiveness, borrowers with FFEL loans need to consolidate their loans into a Federal Direct Loan and then submit a PSLF form before October 31, 2022. Any payments made on your FFEL loan after 2007 will count retroactively toward PSLF.
Will Navient settle student loans?
Navient will agree to settle private student loans it owns but not federal loans — FFEL loans, Stafford loans, subsidized and unsubsidized, and so on — that it services for guaranty agencies. In order to receive a settlement, you may have to fall behind on your student loan payments for several months. In all my years as a student loan lawyer, I have never seen Navient agree to settle a loan that is in deferment, forbearance or repayment.
Skipping your monthly payments is not without risk. It hurts you and your cosigner’s credit scores and puts you both at risk of being sued, which can result in garnishment of your wages, withdrawals from your bank account, and liens placed on your home. But it can also result in you getting out of that loan balance that you have been fighting for years.
Hope for FFEL forgiveness
A statement from the Department of Education today makes it clear that they are trying to resolve the FFEL issue:
FFEL forgiveness
Our goal is to provide relief to eligible borrowers as quickly and easily as possible, and this will help us achieve that goal as we continue to explore additional legally-available options for providing relief to borrowers with privately owned FFEL loans and Perkins loans. . including whether FFEL borrowers can receive one-time debt relief without the need to consolidate.
Without question, this is a setback. However, there is still time for positive developments.
Additionally, the Biden administration has a pretty good track record when it comes to helping FFELP borrowers. Limited forgiveness on PSLF allowed many public servants with FFEL loans to receive the credit they deserve. Likewise, the new law will help borrowers with FFELP spousal consolidation loans qualify for IDR repayments and PSLF.
Today’s events are a clear indication that someone dropped the ball. However, FFELP has a track record of fixing things for borrowers and a clear desire to fix this particular problem.
If FFELP borrowers make enough noise about misrepresentation and exclusion, it could inspire another amendment.
Student Loan Forgiveness: Which Loans Are Eligible?
Only direct loans made by the federal government and staffed loans, which were replaced by direct loans in 2010, are eligible for forgiveness programs.
If you have other types of federal loans, you can consolidate them into one direct consolidation loan, which can give you access to additional income-driven repayment plan options. Non-federal loans through private lenders and loan companies are not eligible for forgiveness.
In 2020, borrowers with federal student loans who attended for-profit colleges and sought loan forgiveness because their school defrauded them or broke certain laws received a setback when then-President Donald Trump vetoed a bipartisan resolution. which overturned the new rules. More difficult to get loan forgiveness.
The new, more stringent rules came into effect on July 1, 2020.
In August 2022, the Biden administration, along with the US Department of Education, approved $32 billion in student loan debt relief for more than 1.6 million borrowers with applications open in October. However, in November 2022, federal courts issued orders blocking the student loan forgiveness program and the Department of Education is no longer accepting applications for student loan forgiveness.
The following specific programs are still available and offer applications and debt relief to those who qualify.
Can (or should) I consolidate my FFELP loans?
You can consolidate FFELP loans in many cases. You cannot consolidate into a direct loan if you already have a spousal consolidation or have an active lawsuit or legal judgment against you.
If you qualify to consolidate, there are still some trade-offs. Consolidating an FFELP loan into a Direct Loan will capitalize any unpaid interest and increase your principal loan balance. Consolidation can also wipe out any progress you’ve made toward income-based payment forgiveness.
Advantages and Disadvantages of FFELP Loan Refinancing
Now that we’ve covered the pros and cons of consolidating your FFELP loans, let’s look at the pros and cons of refinancing them with a private lender.
Steps for FFELP recipients to obtain forgiveness
Unfortunately, there is no quick fix to this situation. You cannot go back in time and submit an application to consolidate yesterday.
The best bet for affected borrowers is to pressure the federal government. Go to studentaid.gov and file a complaint. Call your elected representatives and let them know you are unhappy with the FFEL policy change.
The original student loan forgiveness announcement was clearly timed to appease voters before the midterm elections. If people express their outrage at the reversal, that should inspire action.
Right now, negotiations are likely between the federal government and FFEL loan servicers. Department of Education attorneys must find a way to cancel FFEL loans without harming FFEL loan holders. The more pressure voters put on their elected representatives, the more likely it is that a deal will be struck to avoid litigation.
Now is the time to speak up and be heard.
If all else fails, it’s also possible that a sudden change in rules could lead to a borrower lawsuit against the Department of Education. If that day comes, this article will be updated accordingly.
Outside of the political front, there are many loan management decisions for borrowers currently stuck with FFEL loans. Some borrowers still want to consolidate their FFEL loans.
Advantages of refinancing
Student loan refinancing can enable borrowers with excellent credit to qualify for a lower interest rate. This is especially true for older loans, which were made at very high interest rates. Current federal student loan interest rates are at or near record lows.
Refinancing a private student loan without a cosigner is also a way to obtain the equivalent of a cosigner release. The new private student loan pays off the old loan, effectively releasing the cosigner from their obligation to repay the old loan.
The main challenge is qualifying for a private refinance without a cosigner. But, if the borrower has a steady job and has been making all their payments on time for a few years, their credit profile may have improved enough to qualify for a private refinance on their own.
Cons of refinancing
Refinancing federal student loans into private student loans will lose access to the best benefits of federal student loans. Apart from payment breaks and interest waivers, these benefits include: