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What Are FFELP Loans?
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What Are FFELP Loans?

One way the U.S. government has issued student loans is through the Federal Family Education Loan Program (FFELP). While the program ended in 2010, there are still many borrowers with FFELP loans.

As of the end of 2020—the most recently available data—11 million people had outstanding FFELP loans, with balances totaling over $245 billion.

If you are one of the millions of FFELP borrowers still repaying these loans, here is what you can do to manage your debt.

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What are FFELP Loans?

The FFELP was introduced as part of the Higher Education Act of 1965. Through the FFELP, private lenders issued federal loans that were guaranteed and subsidized by the federal government.

There are two main kinds of FFELP loans: commercially-owned and Education Department-owned.

FFELP loans were issued to undergraduate students, graduate students and parents in the following forms:

  • Stafford: Stafford loans were for undergraduate and graduate students enrolled at least half-time. Students with financial need could receive subsidized loans.
  • Unsubsidized Stafford: Unsubsidized Stafford loans did not offer the interest subsidy for undergraduate and graduate borrowers.
  • PLUS: PLUS loans were for parent borrowers taking out loans for their children’s undergraduate education. In 2006, the FFELP PLUS loan option was expanded to include graduate students.
  • Consolidation: FFELP consolidation loans allowed borrowers to combine multiple federal student loans into one.

The loan program ended in 2010 when the Health Care and Education Reconciliation Act was passed. The last loans were issued prior to July 1, 2010. The FFELP was replaced by the federal Direct Loan Program.

How Do I Know if I Have a FFELP Student Loan?

If you applied for federal financial aid prior to 2010, your loans are probably FFELP loans. Many who borrowed before 2010 still have outstanding loans because they deferred payments or took advantage of extended repayment plans.

To find out for sure what loans you have, you can use the National Student Loan Data System to look up your loan information. Once you log in with your Federal Student Aid ID, you can view all of the outstanding federal loans in your name.

If you don’t have your Federal Student Aid ID, you can also contact your student loan servicer to ask about your loans.

What Should I Do If I Have FFELP Loans?

While FFELP loans are no longer issued and the program ended in 2010, you may still have outstanding FFELP debt. The loans don’t go away just because the program ended; you still have to repay your loans according to your promissory note’s terms.

FFELP and the CARES Act

In March 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed. As part of its relief measures, the CARES Act suspended federal student loan payments and reduced interest rates on all loans to 0%. The CARES Act’s student loan provisions are set to last through September 30, 2021.

For FFELP borrowers, things are a bit confusing. Borrowers with FFELP loans owned by the Department of Education are eligible for the payment suspension and interest waiver. However, borrowers with commercially-owned FFELP loans are not. That means if you have commercially-owned FFELP loans, you are still required to make payments, and your loans are continuing to accrue interest.

In March 2021, the government expanded the CARES Act to include FFELP borrowers that are already in default. If you have FFELP loans but aren’t in default, you can’t take advantage of the payment suspension or interest waiver.

Some FFELP loan servicers are offering support or alternative payment plans for borrowers affected by the pandemic. If you can’t afford your payments, contact your loan servicer to discuss your options.

4 FFELP Loan Relief Options

While most FFELP borrowers aren’t eligible for the CARES Act, there may be other ways to get some relief from your student loan debt. If you can’t afford your payments, consider the following options:

1. Enroll in an Alternative Payment Plan

If your payments are more than you can afford, you may be eligible for one of the following payment plans:

  • Graduated: With a graduated repayment plan, you have a 10-year term. Your payments are initially low, but increase every two years.
  • Extended: The extended repayment plan changes the repayment term to 25 years. Your payments can be fixed or gradual. If your extended plan is gradual, your payments will increase every two years.
  • Income-Sensitive Repayment: Under an income-sensitive repayment plan, your monthly payments are based on your income. As your income changes, your payments will also change.

2. Consolidate Your Loans

Another option is to consolidate your loans with a direct consolidation loan. These are federal loans that are part of the Direct Loan Program, and they’re eligible for the CARES Act relief measures.

By consolidating your FFELP loans, you’ll transfer them into the Direct Loan Program. Once the consolidation is complete, you can take advantage of the current payment suspension and interest waiver.

Once the CARES Act ends and payments resume, you’ll be able to utilize other direct loan benefits, such as the ability to enroll in an income-driven repayment plan.

You can apply for a direct consolidation loan online.

3. Forbearance or Deferment

If you have FFELP loans and aren’t eligible for the CARES Act, you may qualify for a deferment or forbearance period in which you postpone your payments. FFELP forbearance works differently from federal forbearance for direct loans, and may vary based on your servicer.

For example, Navient offers one-month coronavirus forbearance periods for FFELP borrowers who ask for them. During that time, your loan is made current and your payments delayed for at least one month.

4. Refinance Your FFELP Loans

If you want to pay off your FFELP loans as quickly as possible, another option is student loan refinancing. If you have good credit, you could refinance your loans to get a lower interest rate. Or, you can extend your loan term to lower your monthly payments.

However, refinancing federal loans—including FFELP loans—has some drawbacks. Once you refinance your debt, your loans are no longer considered federal loans, and you won’t be eligible for federal forbearance or deferment.

If you decide to refinance your loans, compare rates and policies from multiple student loan refinancing lenders so you can get the best deal.

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