What Are FFELP Student Loans?
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Key takeaways
FFELP student loans are federally backed loans that were originally funded by private companies.
The FFEL Program ended with the 2009-2010 academic year to make way for Direct Loans, and some were purchased by the federal government.
There are two types of FFELP loans: commercially owned and federally owned.
Borrowers with FFELP loans may want to consolidate to take advantage of more student loan benefits including Revised Pay As You Earn income-driven repayment and Public Service Loan Forgiveness.
The education department is offering a one-time waiver of payment rules that will speed many FFELP borrowers toward forgiveness. It includes those with commercially held loans if they consolidate into a Direct Loan by the end of 2023.
What was the FFEL Program?
The Federal Family Education Loan Program, or FFELP, provided student loans to borrowers until June 30, 2010. FFELP loans were issued by private and state lenders but guaranteed by the federal government. That means if a borrower defaulted, the government would pay private companies an interest subsidy to make up for the loss.
The federal government purchased some lenders' FFELP portfolios during the Great Recession. FFELP borrowers did not have a choice as to whether or not their loans were included in the purchases. Now some of this debt is owned by the government.
Although the federal government ended the FFEL Program, there are still about 9.2 million borrowers with outstanding FFELP loans totaling $208 billion, as of Dec. 31, 2022, according to the Education Department. Experts say this debt still exists as a result of strung-together forbearances, defaults and extended terms due to enrolling in the income-based repayment plan.
All federal student loans are now from the Direct Loan Program.
How do I know if I have FFELP loans?
If you have federal student loans from 2010 or earlier, they are likely FFELP loans. Some outstanding FFELP loans are held by the federal government (called ED-held FFELP loans), but most are still privately owned by companies, like the student loan servicer Navient.
Check studentaid.gov to find out what kind of student loan you have and whether it is owned by the federal government or a private company.
What are my repayment options with FFELP debt?
Unconsolidated FFELP loans are eligible for:
Income-based repayment and forgiveness.
Pandemic-related student loan forbearance if they are held by the federal government.
Student loan deferment and forbearance.
Relief during the pandemic for FFELP borrowers
In March 2021, the Department of Education extended interest and collections relief to commercially held FFELP borrowers whose loans are in default. The relief measure was retroactive to March 13, 2020, and will expire when federal student loan payments resume — currently slated for the summer of 2023. If a borrower's tax refunds were seized or wages garnished during this time, they can expect to have this money returned. Here's what else the relief measure does:
Borrowers who made voluntary payments on these loans may request a refund of those amounts.
Guaranty agencies, which hold defaulted FFELP loans, will be instructed to implement a 0% interest rate for borrowers.
Any loans that went into default during the pandemic will be returned to good standing.
The department will request the credit bureaus remove the default from credit histories.
The relief does not apply to the commercially held FFELP loans that are not in default.
Are FFELP loans eligible for cancellation?
President Biden announced a plan to cancel up $20,000 in student loan debt per borrower making under $125,000 for individual filers and $250,000 for joint filers. If the now-frozen plan survives legal challenges, eligible borrowers would get $20,000 in cancellation if they were Pell Grant recipients and $10,000 if they weren't.
Federally owned FFELP loans would be eligible for this cancellation; if your payments have been paused, you'd qualify.
Commercially owned FFELP loans would be eligible if borrowers apply to consolidate. Borrowers with commercially owned FFELP loans that also have a Direct Loan Program loan are only eligible for cancellation for their Direct Loan. This was a reversal of previous guidance regarding cancellation eligibility of commercially owned FFELP loans. Over four million borrowers have commercially owned FFELP debt. Contact your servicer to confirm which type of FFELP loan you have.
Further relief efforts may be possible, but the Department of Education has not released any details to suggest a plan.
Are FFELP loans eligible for PSLF?
FFELP loans aren't eligible for:
Public Service Loan Forgiveness, or PSLF.
To access these programs, you’ll have to consolidate FFELP loans into a federal Direct Loan.
In October 2021, the Department of Education announced a limited waiver that would allow payments on FFEL loans to count toward PSLF. In order to benefit from the limited waiver, borrowers with FFEL loans needed to consolidate their loans into federal Direct Loans and then submit a PSLF form before Oct. 31, 2022. Any payments made on your FFEL loans after 2007 would retroactively count toward PSLF.
If you missed that window, the department unveiled a new, one-time IDR waiver that does much the same thing. You'd have to apply for PSLF by the end of 2023.
Can (or should) I consolidate my FFELP loan?
You can consolidate a FFELP loan in many cases. You cannot consolidate into a Direct Loan if you already did a spousal consolidation — you can split your spousal consolidation loan up again if need be — or if you have active litigation or a legal judgment against you.
If you are eligible to consolidate, there are generally still some trade-offs. Consolidating FFELP loans into a Direct Loan will cause any unpaid interest to capitalize and increase your principal loan balance. Consolidation may also wipe out any progress you’ve made toward income-driven payment forgiveness.
But borrowers can avoid these consolidation downsides if they consolidate by the end of 2023. Borrowers will need to do this to take advantage of the one-time IDR waiver that allows time in forbearance and some deferments to count toward income-driven loan forgiveness. This consolidation requirement applies only to commercially held FFELP loans; the account adjustment will be automatic those with federal FFELP loans.
