What Are FFELP Student Loans?

Relief such as debt cancellation or forgiveness plans is available to many FFELP borrowers, but not all.

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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 May 1, 2023.

  • FFELP loans that are held by the government qualify for student debt cancellation of as much as $20,000. Commercially held FFELP loans qualify if you applied to consolidate into a Direct Loan by Sept. 29, 2022. Your servicer can tell you which type you have.

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What was the FFEL Program?

The Federal Family Education Loan Program, or FFEL Program, 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 11.2 million borrowers with outstanding FFELP loans totaling over $248 billion, according to the most recent data from 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 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.

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What are my repayment options with FFELP debt?

Unconsolidated FFELP loans are eligible for:

Relief during the pandemic for FFELP borrowers

The Department of Education extended interest and collections relief to commercially held FFELP borrowers whose loans are in default. The relief measure is retroactive to March 13, 2020, and expires after Dec. 31, 2022. 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. Eligible borrowers will get $20,000 in cancellation if they were Pell Grant recipients and $10,000 if they weren't.

Federally owned FFELP loans are eligible for this cancellation; if your payments have been paused, you qualify.

Commercially owned FFELP loans will be eligible if borrowers applied to consolidate by Sept. 29, 2022. 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 4 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?

FFEL loans aren't eligible for:

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 need 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 will retroactively count toward PSLF.

If you missed that window, the department unveiled a new, one-time waiver that does much the same thing. You'd have to apply for PSLF by May 1, 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 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.

Neither of those downsides applies to borrowers who take advantage of the one-time IDR waiver that allows time in forbearance and some deferments to count toward income-driven loan forgiveness. Consolidate by May 1, 2023. This applies to both federal- and commercially-held FFELP loans.

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