- FFELP loans are student loans from private lenders providing student loans backed by the government.
- The loans stopped being offered in 2010 following the 2008 economic crisis.
- There is still a total of $191 billion of FFELP loan debt outstanding.
What are FFELP loans?
The Federal Family Education Loan Program, or FFELP, was created in 1965, and was a predecessor to the student loans we know of today. It set the stage for the proliferation of the average student loan debt today held by an estimated 43.6 million Americans. The total debt load for student loans in the United States is more than $1.7 trillion.
Federal student loans, with a twist
FFELP loans are backed by the government, but originally funded by private lenders. The FFELP program ended in 2010, but millions of borrowers still have them.
Two types
There are two types of FFELP loans: commercially held and federally held. Commercially held FFELP loans are still owned by the private lenders, whereas federally held loans were purchased by the government during the financial crisis in 2008.
Key differences from direct loans
Interest rates
FFELP loan interest rates were set by the federal law and, at the time, may have been different from Direct Loans. Usually, both rates are based on market conditions but capped at a certain level, said Cindy Chanin, founder and director at Rainbow EDU Consulting & Tutoring.
Loan servicers
The Department of Education purchased many of the outstanding FFELP loan portfolios from lenders in 2008 and later. But some commercial FFELP loans do still exist.
The top five holders of FFELP loans as of 2022 were:
Navient Credit Finance Corp. | $51.2 billion |
Nelnet | $15.2 billion |
Truist Bank | $5.4 billion |
ECMC Group | $2.9 billion |
PA Higher Ed Asst Authority (PHEAA) | $2.2 billion |
The most significant difference between FFELP and loans today is that FFELP loans were made by private lenders and guaranteed by the federal government (and FDSLP loans are made and guaranteed by the federal government).
Repayment options
FFELP loans that have not been consolidated are eligible for standard repayment, graduated repayment, extended repayment, Income-Based Repayment (IBR) plans, and Income-Sensitive Repayment (ISR).
FFELP loans can be consolidated into a Direct Consolidation Loan, providing access to income-driven repayment plans like Revised Pay as You Earn and Income-Based Repayment.
Loan forgiveness
Student loan consolidation enables eligibility for loan forgiveness programs, such as Public Service Loan Forgiveness and Income-Driven Repayment Plan Forgiveness. However, it involves risks, like losing previously earned Public Service Loan Forgiveness (PSLF) and repayment plan forgiveness credit.
Options for FFELP loan borrowers
Consolidation into a direct loan
For parents with loans for their children, consolidating FFELP Loans into a Direct Loan makes Parent PLUS Loans eligible for the Income-Contingent Repayment (ICR) plan. ICR links monthly payments for the new Direct Consolidation Loan to discretionary income and family size, potentially lowering payments to zero.
On the downside, according to the Federal Student Aid, an office of the Department of Education:
- Your monthly payment may go down, but you may have to pay longer.
- If you have unpaid interest, your principal balance will go up.
- Your new consolidation loan will generally have a new interest rate.
- You can lose credit for your payments toward income-driven repayment (IDR) forgiveness.
Refinancing
Student loan refinancing can lower your interest rate and help you pay down your loan faster. However, you'll lose federal benefits.
Keep as is
If you have a low, fixed interest rate, and you're able to keep up with your payments, it might be fine to do nothing.
FAQs
Whether or not you consolidate your FFELP loans depends on your interest rate, repayment goals, and if you want access to income-driven repayment or PSLF.
To find our who your FFELP loan servicer is, you can check on the Federal Student Aid website or your credit report.
If your FFELP loans are in default, you can potentially still refinance, but it'll be more difficult. Rehabilitation might be necessary first.
No, FFELP loans are not eligible for the student loan payment pause. Only Direct Loans are eligible for the current pause and interest waiver.
