Federal Family Education Loan Program

Federal Family Education Loan Program

In 2006, the Federal Family Education Loan Program paid out over $ 50 billion in student loans. States in 1966, this program is the foundation for student loans such as the Perkins Loan, the Stafford Loan, and PLUS. This program was established by law of Congress and has distributed billions upon billions of students for their education over the past 40 years.

In a sense, the government acts as a guarantor for loans covered by this program and gives credit institutions greater security in lending loans to students and parents for college funds. For this reason, many and different types of lenders are willing to join this loan program.

Federal Family Education Loan (FFEL)

There is a small percentage of situations where these federal family education loan will default. In these cases, a third party will step in and apply to the federal government to get some of the lost money back. While they may not be able to recover every penny, they can usually make up some of their loss.

Federal Family Education Loan
Federal Family Education Loan

Subsidized and unsubsidized loans are the two options that fall under this federal family education loan program.

The difference between the two is that with an unsubsidized loan, the borrower is responsible for all interest on the loan.

If you only start paying six months after graduation, all interest accrued up to that point will be offset against the original loan amount.

With a subsidized loan, the state pays all interest on the loan until the borrower starts paying 6 months after it was closed.

Billions of dollars are borrowed each year through the PLUS loan program, which enables parents and graduates to fund the high costs of college education.

This is an invaluable tool for parents who are paying for their child’s education. Since July 2006 it has also been an invaluable tool for doctoral students.

Exclusion Of The FFEL From Federal Family Education Loan Program

Since many of the recent federal family education loan programs funding have been limited to direct loans only, FFEL borrowers are often excluded:

  • Only direct federal student loans are eligible for public service loans. FFEL loans are not eligible.
  • Only direct federal student loans are repayable for borrower defense. FFEL loans are not eligible.
  • Only direct federal student loans are eligible for certain income-based repayment plans such as Pay-As-You-Earn (PAYE), Revised Pay As You-Earn (REPAYE), and Income-Contingent Repayment (ICR), all of which allow for a student loan waiver of 20 or 25 year repayment . Both direct and FFEL loans are eligible for Income Based Repayment (IBR).
  • Only government-held loans (including direct loans and FFEL loans that have been assigned or transferred to the U.S. Department of Education) are eligible for the CARES Act Student Loan Facilitation, which suspends payments, stops recoveries, and charges interest through September 30th freezes, 2021.

What Was The FFEL Program?

The Federal Family Education Loan Program (FFEL program) made student loans available to borrowers through June 30, 2010. FFEL loans were made by private and government lenders but guaranteed by the federal government. That is, should a borrower default, the state pays private companies an interest subsidy to offset the loss.

The federal government bought some lenders’ FFEL portfolios during the Great Recession. FFEL borrowers had no choice as to whether or not their loans were included in the purchases. Now some of that debt belongs to the government.

Although the federal government ended the FFEL program, there are still 11.2 million borrowers with outstanding FFEL loans totaling over $ 248 billion, according to the latest data from the Department of Education. Experts say these debts still persist due to back-to-back forbearances, defaults, and extended maturities from being included in the earnings-based amortization plan.

How To Apply Federal Family Education Loan

A full application form for these loans can be found online at fafsa.ed.gov/. The application that you can find here (Free Student Grant Application – or FAFSA) is the application that must be completed for all the different types of campus based student loans offered under FFELP.

A total package of financial assistance will likely include various loan programs. Once it is clear what a student or family can contribute to their education, a loan formula can be created to make up for the deficit.

Federal Family Education Loan
Federal Family Education Loan

The funds from the scholarship package are usually transferred directly to the university at the beginning of each semester to pay the tuition fees.

Any excess funds left after paying tuition and fees will be paid out to the student or their parents.

The fees associated with student loans vary. They can be up to 3% or up to 8%. Around 4 or 5 percent is common.

Since there is a variation, it is important to do some research so that you can get the cheapest loan that is available to you.

Biden Student Loan Forgiveness

Student loan borrowers, consumer advocates and progressive Democratic lawmakers continue to press President Biden to unilaterally issue comprehensive student debt relief.

While Biden has expressed some reluctance to go that route, the government has indicated that it is considering it as an option.

There could be restrictions on what types of federal student loans Biden could cancel through action by the executive if he so chooses. While the Higher Education Act – which would regulate any kind of executive power over comprehensive student debt relief – applies to both FFEL loans and direct loans, it is unclear whether President Biden would limit his powers to federal loans that the government manages directly.

Congress could pass laws extending facilitation to all types of student loans, but that would undoubtedly add to the cost of the program. It is unclear whether such legislation would find sufficient support in Congress.

How To Check If You Have A Federal Family Education Loan

If you are a federal family education loan borrower and you are unsure whether your loan is an FFEL loan, you can access your federal student loan records at StudentAid.gov. After signing in to your account screen, click the “View Details” button in the “My Help” box. You can click the Download My Student Aid Records link to see a breakdown of your Direct Loan and FFEL loan balances.

If you have federal student loans from 2010 or earlier, they are likely FFEL loans. Some outstanding FFEL loans are held by the federal government (called ED-held FFEL loans), but most are still privately owned by companies like Navient.

Check studentaid.gov to see what type of student loan you have and whether it is owned by the federal government or a private company.

What Repayment Options Do I have With FFEL Debts?

FFEL unconsolidated loans are eligible for:

  • Income-based repayment and loan forgiveness.
  • CARES Act pauses payment and interest when federally held.
  • Deferral and deferral of student loan.

Relief During the Pandemic for FFEL Borrowers

The Ministry of Education granted commercial FFEL borrowers whose loans are in arrears with interest and debt collection facilities. The relief measure applies retrospectively to March 13, 2020 and ends after September 30, 2021. If a borrower’s tax refunds were confiscated or wages were seized during this time, he can expect a refund of this money. Here’s what else the relief measure does:

  • Borrowers who have made voluntary payments on these loans may request a refund of these amounts.
  • Guarantors holding failed FFEL loans are instructed to introduce a 0% interest rate for borrowers.
  • Any loans that were in default during the pandemic will be restored to good condition.
  • The department asks the credit reporting agencies to remove the default from the credit history.
Federal Family Education Loan
Federal Family Education Loan

The relief does not apply to the commercially held FFEL loans that are not in default.

Are FFEL Loans Suitable For PSLF?

FFEL loans are not eligible for:

  • Public Service Lending or PSLF.
  • The remuneration is based on income.
  • Revised Pay-As-You-Ear.
  • Income-based repayment.

To access these programs, you must group FFELP loans into a federal direct loan.

Can (or Should) I consolidate My FFELP Loan?

You cannot consolidate into a direct loan if you have already completed spousal consolidation or if you have an active legal process or court judgment pending against you.

If you are eligible to consolidate, there are still some tradeoffs. Consolidating FFEL loans into a direct loan will result in any unpaid interest being capitalized and your principal loan balance increased. Consolidation will also undo any strides you’ve made towards income-related payment waiver.