Federal Family Education Loan Program: A Comprehensive Guide

The Federal Family Education Loan Program (FFELP) was a crucial part of the US education loan landscape until its repeal in 2010.

FFELP allowed students to borrow money from private lenders while the government guaranteed the loans.

The program was established in 1972 to provide more student loan options.

FFELP loans had a fixed interest rate, which was capped at 8.25% for the 2011-2012 school year.

These loans also had a 10-year repayment period.

The Federal Family Education Loan Program, or FFEL Program for short, was a way for the U.S. Department of Education to partner with private lenders to provide student loans.

These loans were guaranteed by the federal government, which means they were backed by the government in case the borrower couldn't pay. The FFEL Program included several types of loans, including subsidized and unsubsidized Federal Stafford Loans.

The FFEL Program also included Federal PLUS Loans, which were designed for parents or graduate students, and Federal Consolidation Loans, which allowed borrowers to combine multiple loans into one loan.

The FFEL Program ended on July 1, 2010, but if you were attending school before that date, you may still have a FFEL Program loan.

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To qualify for PSLF, you'll need to consolidate your FFEL Program loans into a Direct Consolidation Loan, as only Direct Loans are eligible for PSLF.

You can still get credit for payments made before consolidation, but only if you consolidate into the Direct Loan program and meet other PSLF requirements.

The one-time account adjustment can retroactively give you PSLF credit for those earlier payments, but it won't show up on your account until the adjustment officially occurs.

To apply for interest benefits on a Stafford loan, you or your school must submit a statement to the lender, and the eligible institution must have determined and documented your amount of need for a loan based on your estimated cost of attendance and expected family contribution.

A Federal Consolidation Loan received by the lender prior to January 1, 2000, may qualify for special allowances, but no special allowance shall be paid during any quarter on a loan for which the application was received on or after October 1, 1998, unless the average of the bond equivalent rate of the 91-day Treasury bills auctioned during that quarter exceeds a certain rate.

For any FFEL loan made on or after October 1, 2007, and prior to July 1, 2010, a lender shall pay the Secretary a loan fee equal to 1.0 percent of the principal amount of the loan.

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The Federal Family Education Loan Program (FFELP) had a complex program participation and administration structure.

To participate in the program, schools had to be approved by the U.S. Department of Education.

FFELP participating lenders were required to follow strict guidelines and regulations.

The U.S. Department of Education was responsible for overseeing and administering the program.

Schools were required to annually certify their participation in the FFELP program.

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FFELP loans offer several repayment options to help you manage your debt. You can choose from standard, graduated, extended, and income-based repayment plans.

If you have FFELP loans that haven't been consolidated, you're eligible for standard, graduated, extended, income-based repayment (IBR), and income-sensitive repayment (ISR) plans.

To access additional income-driven repayment plans like Revised Pay as You Earn, you need to consolidate your FFELP loans into a Direct Consolidation Loan.

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.

Here are the repayment plans available for FFELP loans:

Additionally, FFELP loans are eligible for student loan deferment and forbearance.

Loan servicers play a crucial role in managing student loans, and understanding who they are and what they do can be helpful for borrowers. Navient, one of the main student loan servicers, recently transferred its private and FFELP student loan portfolio to MOHELA.

MOHELA took over Navient's loan portfolio in October 2024, but don't worry, most things stayed the same for affected borrowers. Their loan terms, interest rate, account number, repayment plan, and autopay settings remained unchanged after the transfer.

The Department of Education purchased many FFELP loan portfolios from lenders in 2008, but some commercial FFELP loans still exist. Here are some of the major loan servicers and the size of their FFELP loan portfolios:

The key difference between FFELP and federal student loans today is that FFELP loans were made by private lenders and guaranteed by the federal government.

Navient finished transferring its FFELP loans to MOHELA in October 2024.

The transfer was a big deal for Navient, which had managed commercially-held FFELP loans.

Impacted borrowers should have received communication from Navient before their loans transferred to MOHELA, and a welcome letter from MOHELA after the transfer happened.

Borrowers can breathe a sigh of relief - not much has changed for them. Their loan terms, interest rate, account number, repayment plan, and autopay settings stayed the same after the transfer, according to Navient.

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Navient Credit Finance Corp. is one of the largest servicers of FFELP loans, with a portfolio of over $51.2 billion. They are responsible for managing the payments, interest rates, and other terms of these loans.

Nelnet is another significant servicer, handling FFELP loans worth $15.2 billion. They work with borrowers to set up payment plans and ensure they stay on track with their loan obligations.

Truist Bank and ECMC Group are also major players in the FFELP loan servicing space, with portfolios of $5.4 billion and $2.9 billion respectively. These servicers help borrowers navigate the complex process of loan repayment.

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PA Higher Ed Asst Authority (PHEAA) rounds out the list of significant FFELP loan servicers, with a portfolio of $2.2 billion. They work with borrowers to provide support and guidance throughout the loan repayment process.

Here are the top FFELP loan servicers, listed by their portfolio size:

FFEL loans are not eligible for the Public Service Loan Forgiveness program, but you can consolidate them into a Federal Direct Student Loan and gain access to loan forgiveness.

To qualify for loan forgiveness, you need to consolidate your FFEL Program loans into a Direct Consolidation Loan. This is the only way to make your FFEL loans eligible for Public Service Loan Forgiveness.

Consolidating your loans allows you to get credit toward Public Service Loan Forgiveness for payments made before consolidation, but only if you meet other PSLF requirements. This is a one-time account adjustment that can benefit you in the long run.

Under a new limited waiver announced by the Department of Education, FFEL loans can now be consolidated with previous payments made before consolidation considered qualifying payments. This is a game-changer for FFEL borrowers who have been paying on their loans for years.

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Loan interest and payments can be complex, but let's break it down.

For most Stafford loans made before July 1, 2006, a variable rate applies, changing annually with a 8.25% cap. Stafford loans made beginning July 1, 2006 have a fixed rate of 6.8%.

The interest rate for PLUS loans made beginning July 1, 2006 is 8.5% in the FFEL Program, while in the DL Program, it's 7.9%. For PLUS loans made before July 1, a variable rate applies, with a 9.00% cap.

Here's a summary of the interest rates for different types of loans:

In some cases, interest benefits may be available on Stafford and Consolidation loans. To qualify, borrowers must meet certain eligibility criteria, such as submitting a statement to the lender or having a loan application received by the lender during a specific time period.

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To qualify for interest benefits on a Consolidation loan, you need to meet certain eligibility requirements.

A Consolidation loan borrower qualifies for interest benefits during authorized periods of deferment if the loan application was received by the lender on or after January 1, 1993 but prior to August 10, 1993.

You must submit a statement to the lender to apply for interest benefits on a Stafford loan. The student, or the school at the direction of the student, must submit this statement.

A Federal Consolidation Loan for which the application was received by the lender prior to January 1, 2000, is eligible for interest benefits, except for certain exceptions.

For a Federal Consolidation loan, a lender may be required to repay the special allowance received on a loan guaranteed by a guaranty agency under certain circumstances.

A lender shall pay the Secretary a loan fee equal to 1.0 percent of the principal amount of the loan for any FFEL loan made on or after October 1, 2007 and prior to July 1, 2010.

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Interest rates can be a bit tricky to understand, but don't worry, I've got you covered. For most Stafford loans made before July 1, 2006, a variable rate applies, changing annually with an 8.25% cap.

Stafford loans made beginning July 1, 2006, have a fixed interest rate of 6.8%. This rate has remained the same for new subsidized and unsubsidized Stafford loans made after that date.

New subsidized Stafford loans to undergraduates beginning July 1, 2008, had a unique interest rate situation. The rate under the new law did not extend to loans disbursed after June 30, 2012, and reverted back to 6.8%.

PLUS loans made beginning July 1, 2006, have a fixed interest rate of 8.5% in the FFEL Program, and 7.9% in the DL Program. For PLUS loans made before July 1, a variable rate applies, capped at 9.00%.

Here's a quick summary of the interest rates for various loan types:

The House passed a resolution in May 2013 to tie student loan rates to free market loan rates, but it's unclear if this change was implemented.

Payment of Special Allowance is a crucial aspect of loan interest and payments.

Some borrowers may be eligible for a special allowance, which can be paid in addition to the loan interest.

This allowance is usually a percentage of the loan amount and can be a significant reduction in the total amount owed.

For example, if you're paying a loan with a 10% interest rate and a special allowance of 5%, your effective interest rate would be 5%.

As a result, you'll pay less interest over the life of the loan, which can save you money in the long run.

However, not all loans offer a special allowance, so it's essential to review the terms of your loan agreement to see if you qualify.

It's also worth noting that some lenders may offer a special allowance for borrowers who make regular payments on time, which can be a great incentive to stay on top of your payments.

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The Federal Family Education Loan Program (FFELP) was a game-changer for many students. It allowed private lenders to fund federal student loans, which were then backed by the government.

FFELP loans were originally funded by private lenders, but the government provided the guarantee. This meant that borrowers could get loans with lower interest rates and more flexible repayment terms.

The FFELP program ended in 2010, but millions of borrowers still have these loans.

There are two main types of FFELP loans: commercially held and federally held.

Commercially held FFELP loans are still owned by private lenders. This means that the loan is held by a bank or other financial institution, rather than by the government.

Federally held FFELP loans were purchased by the government during the financial crisis in 2008. This change in ownership can affect how the loan is managed and repaid.

Here's a breakdown of the two types of FFELP loans:

The Federal Family Education Loan Program (FFELP) has its own set of terms and definitions that are crucial to understand.

A Lender is a bank, credit union, or other financial institution that provides loans to students under the FFELP.

The FFELP is a government-backed program, meaning the federal government provides a guarantee to lenders in case borrowers default on their loans.

A Servicer is a company that handles the day-to-day tasks of managing a loan, such as processing payments and sending statements.

A Guarantor is the entity that agrees to repay a loan if the borrower defaults, in this case, the federal government.

The FFELP was replaced by the Direct Loan Program in 2010, but it's still important to understand the terms and concepts that defined it.