Do FFEL Loans Qualify for Student Loan Forgiveness?July 8, 2022
Are loans issued under the Federal Family Education Loan Program (FFELP) eligible for forgiveness? Although FFELP loan forgiveness isn’t an option, there are workarounds for borrowers that want to take advantage of forgiveness programs like Public Service Loan Forgiveness (PSLF).
What Are FFELP Loans?
Loans issued under the FFELP are often referred to simply as FFEL loans. These loans were issued to undergraduate students, graduate students, and parents. The U.S. Department of Education ended the FFELP in 2010; no FFEL loans were issued after July 1, 2010.
Although the FFELP was discontinued over a decade ago, there are still many borrowers with these loans. As of July 1, 2022, 9.95 million people owed $225.8 billion in outstanding FFEL Loans.
Why Isn’t FFEL Loan Forgiveness an Option?
For federal student loan borrowers, a major benefit is the ability to take advantage of forgiveness programs like PSLF or forgiveness through income-driven repayment (IDR) plans. However, loans issued under the FFELP aren’t eligible for loan forgiveness in their current state.
The FFELP was complicated. Loans could be owned by the government, or they could be commercial loans and owned by private lenders or schools. Because they could be owned by private companies, loans issued through the FFELP program aren’t eligible for federal loan forgiveness programs.
What to Do If You Have Outstanding FFEL Loans
If you currently have FFEL loans and want to apply for PSLF or IDR plans, a workaround may be possible for FFELP loan forgiveness.
Public Service Loan Forgiveness
Under PSLF, you can have your remaining loan balance forgiven if you work for an eligible non-profit organization or government agency for ten years and make 120 qualifying monthly payments.
Typically, FFEL loans aren’t eligible for PSLF; however, the Department of Education announced a temporary expansion of the PSLF program in October 2021. For a limited time, borrowers can get credit for past payments on loans — such as FFEL loans — that would otherwise not qualify for PSLF.
However, your eligibility isn’t automatic. If you have FFEL loans, you must consolidate them with a federal Direct Consolidation Loan before October 31, 2022.
Income-Driven Repayment Forgiveness
Eligible borrowers that enroll in IDR plans can reduce their monthly payments since IDR plans base your payments on a longer loan term and a percentage of your discretionary income. Under the current IDR plan rules, borrowers can qualify for loan forgiveness if they still have a balance at the end of their loan term after making payments under an IDR plan. Depending on the plan, the repayment term can be 20 or 25 years.
If you have FFEL loans, you are usually ineligible for IDR plans. However, the Department of Education has temporarily expanded the guidelines for IDR forgiveness.
- FFEL loans owned by the Education Department: No action is required; any payments made will automatically count toward the 20 to 25 years of payments needed.
- Commercially-owned loans: If you have commercially-owned FFEL loans, you need to take action to qualify for IDR forgiveness. You must consolidate your loans with a Direct Consolidation Loan to get on track for loan forgiveness.
To find out if your loans are commercially-owned or owned by the Education Department, use your FSA ID to log onto the National Student Loan Data System or call the Federal Student Loan Information Center at 1-800-433-3243.
FFELP Loan Forgiveness Alternatives
If you have FFEL loans but cannot benefit from IDR plans because your income is too high or because you’re ineligible for PSLF due to your employer type, there are other ways to manage your loans. Besides basic strategies like sticking to a budget and making extra payments, using these three FFEL loan forgiveness alternatives can help you eliminate your loans faster:
1. Employer Assistance Programs
A growing number of employers are offering student loan repayment assistance programs for their workers. Under these programs, businesses will match student loan payments to a specified annual or lifetime maximum. By utilizing these programs, you can get help with your loans and pay them off sooner.
2. State Loan Repayment Programs
Some states operate loan repayment programs to attract workers in high-need areas. Particularly if you work in healthcare, education, or law, you may be eligible for partial or full loan forgiveness in exchange for a service commitment. You can find out what programs are available in your area by contacting your state education agency.
3. Student Loan Refinancing
One of the biggest downsides to FFEL loans is their interest rates. Their rates can be quite high; in fact, some FFEL loans have rates as high as 8.5%. If you have a high-interest loan and are ineligible for PSLF or make too much money to benefit from IDR plans, another option is to refinance your student loans.
You could potentially qualify for a lower interest rate, reduce your payments and save thousands of dollars. Use the ELFI student loan refinance calculator to find out how refinancing would affect your payments and total repayment cost.*
Remember, when you refinance FFEL loans, they become private loans, and they’re no longer eligible for federal loan forgiveness programs, IDR plans, or other federal loan benefits.