How to get student loan forgiveness if you have an FFELP Loan

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The Federal Family Education Loan (FFEL) Program was one of the first student loan programs in the country. While the program ended on July 1, 2010, there are still many borrowers with FFEL loans.

In the past, borrowers with FFEL loans had to jump through hoops to be eligible for loan forgiveness. But thanks to recent changes from the Biden administration, FFEL borrowers will find it much easier to qualify. Read below to see how the new rules work.

What are FFEL loans?

FFELP was a loan program that allowed private lenders to disburse federal student loans. This is different from the William D. Ford Federal Direct Loan Program, where the U.S. Department of Education issues student loans directly to borrowers and has contracts with third-party loan servicers to collect on those loans.

Even though the program no longer exists, many FFEL borrowers are still making payments on their loans.

Are FFEL loans federal or private?

Although FFEL loans are administered by private loan companies, they are still federal loans. This means that FFEL borrowers are eligible for many federal perks and benefits, like some income-driven repayment plans, extended deferment and forbearance periods and loan forgiveness options.

Do FFEL loans qualify for loan forgiveness?

In the past, FFEL loans were not eligible for loan forgiveness through Public Service Loan Forgiveness or most income-driven repayment plans, which require you to make payments for a certain number of years on the plan. Only Direct Loans qualified, so FFEL borrowers had to consolidate their loans into a Direct Consolidation Loan if they wanted to pursue a forgiveness program. As a result, many borrowers had to start from scratch with their repayment timeline; for instance, even if borrowers had been making payments on FFEL loans for 10 years, they would have to make another 10 years of payments to be eligible for Public Service Loan Forgiveness after consolidating.

However, in 2021, the Department of Education instituted new temporary rules with the Public Service Loan Forgiveness (PSLF) program. Now, any payments made while working under a qualifying employer will retroactively count toward PSLF —  even if you had an FFEL loan while making those payments. To qualify for this limited waiver, you need to consolidate those loans by Oct. 31, 2022. For more information, visit the Federal Student Aid website.

Other ways to pay off FFEL loans

If you have an FFEL loan and want to see what your options are beyond the standard 10-year plan, consider one of the following alternatives.

Income-driven repayment plan

FFEL loans are eligible for several income-driven repayment plans, which cut down your monthly payment to a percentage of your income. If you don’t wish to consolidate your FFEL loan, you may apply for the Income-Based Repayment Plan, which will set your payment at 15 percent of your discretionary income for 25 years. If you consolidate your FFEL loans into a Direct Consolidation loan, you’ll also be eligible for Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE) and Income-Contingent Repayment (ICR), which have different payment percentages and repayment terms.

At the end of the income-driven repayment plan, your remaining loan balance is forgiven. That’s a significant draw, though keep in mind that you’ll need to make payments for 20 or 25 years on these plans. Because of this, you’ll be in debt longer than if you stick with the standard repayment plan.

Other federal repayment plans

In addition to the standard repayment plan, the federal government offers extended and graduated repayment plans, which will also result in lower monthly payments than the standard plan. To qualify for these plans, you’ll need to consolidate your FFEL loans.

The extended plan has a 25-year term, and payments can be either fixed or graduated. The graduated repayment plan has a 10- to 30-year repayment period, and payments will start out low and increase every two years.

The main difference between these plans and an income-driven repayment plan is that there is no loan forgiveness once the term has been completed. This often results in borrowers paying the most interest under one of these plans.

Refinancing

Refinancing your FFEL loans can result in a lower interest rate, which may lead to less interest paid 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 offering much lower rates.

The downside of refinancing is that you’ll lose access to income-driven repayment plans and federal forbearance options, since you will need to refinance with a private lender. Weigh the pros and cons and see which option fits your current financial situation.

The bottom line

If you have FFELP Loans and are searching for student loan forgiveness, you’ll need to consolidate your loans through a Direct Consolidation Loan. From there, you can apply for Public Service Loan Forgiveness or an income-driven repayment plan, though it may still take a few years to see your balance forgiven. If you’re interested in Public Service Loan Forgiveness, act quickly; the government’s limited waiver is open only through Oct. 31, 2022, and it’s best to apply early to allow enough time for processing.

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Written by
Zina Kumok
Contributing writer
Zina Kumok has been a full-time personal finance writer since 2015. She’s a three-time nominee for Best Personal Finance Contributor/Freelancer at the Plutus Awards and a two-time speaker at FinCon, the premier financial media conference.
Edited by
Student loans editor