As a student, there are several loan options for you. One of these options is the FFEL loans. It is necessary to mention that the FFEL program ended in 2010. However, there is still a massive amount of outstanding student loan debt stemming from the program.
In fact, as of Q3 of 2018, FFEL accounts for $288.6 billion of outstanding student loan debt for 13.8 million borrowers. There are a lot to know about FFEL loans.
What is FFEL Loans?
FFEL loans stands for Federal Family Education Loan. It was a student loan program backed by the federal government. In other words, it was subsidized and guaranteed by the United States federal government. It began as part of the Higher Education Act of 1965. Also, it was officially launched in 1966.
Through the program, private lenders provided federally guaranteed student loans to students and parents. Also, the government mandated specific interest rate levels for all FFEL loans.
About FFEL Loans
Since 1966, over 60 million Americans have used FFEL loans to help pay for college expenses. With the passing of the Health Care and Education Reconciliation Act of 2010, this happened. The program was discontinued. As such, no new FFEL loans were made available after July 1, 2010.
The FFEL program was replaced by the Direct Loan program. This is the current student loan program that is handled by the federal government. The program issued loans from 1965 until it was ended in 2010. Since 1965, 60 million Americans have used FFEL loans to pay for education expenses
The FFEL was initiated by the Higher Education Act of 1965. Also, it was funded through a public/private partnership. This was administered at the state and local level. In 2007-08, FFEL loan served 6.5 million students and parents. It lend a total of $54.7 billion in new loans (or 80% of all new federal student loans).
FFEL Loans and Other Lenders
In the FFEL loans Program, private lenders made federally guaranteed student loans to parents and students. Commercial lenders like Sallie Mae (now Navient) use their private capital to finance loans under the FFELP. However, they received subsidies from the federal government.
These subsidies were used to maintain interest rates at the federally mandated levels. Also they were used to pay down fees associated with the loans. Furthermore, they cover expenses associated with collection and defaults.
It is important you know this. The government also guaranteed a large portion of the loans. Also, they insure private lenders against default.
Thus, if a parent or student defaults, the private lender was reimbursed by the government for its losses. In contrast, under the Direct Loan program, the government lends directly to students using federal funds provided to it by the US Treasury.
FFEL Loans Types
There are 4 types of FFEL loans that were available to borrowers during the program’s existence. They are:
This is one of the types of FFEL loans. For students who meet a financial needs test, the government pays all interest costs on behalf of borrowers.
This is while they are in school. Also, it is during grace and deferment periods. Repayment begins six months after graduation. Otherwise, the student withdraws to a less than half time status.
This type of FFEL loans focus on students who do not meet a financial needs test. Also, it focuses on those who need to supplement their subsidized loans. Thus, they may receive unsubsidized Stafford loans.
Borrowers may defer payment of interest during school, grace. Also, they can do this during deferment periods. However, they are responsible for all interest that accrues. Repayment begins six months after graduation. Otherwise, the student withdraws to a less than half time status.
This type of FFEL loans is available to parents and graduate students. It is to help them pay for education costs.
This type of FFEL laons combines more than one student loan into one single loan.
Interest rates are set by law, as follows:
1. For most Stafford loans made before July 1, 2006 please note. Variable rate applies (changing annually with an 8.25% cap).
2. Stafford loans made beginning July 1, 2006 is 6.8%.
3. New subsidized Stafford loans to undergraduates beginning July 1, 2008 (per recent budget reconciliation law) are as follows:
- 6.0% for a loan first disbursed between July 1, 2008, and June 30, 2009.
- 5.6% for a loan first disbursed between July 1, 2009, and June 30, 2010.
- 4.5% for a loan first disbursed between July 1, 2010, and June 30, 2011.
- 3.4% for a loan first disbursed between July 1, 2011, and June 30, 2012.
4. Interest rate under the new law does not extend to loans disbursed after June 30, 2012. Thus, the rate for these new loans will revert to 6.8%. The law did not affect new unsubsidized Stafford loans. As such, the rate remains 6.8%.
5. PLUS loans made beginning July 1, 2006 is 8.5% in FFEL Program. Also, it is 7.9% in DL Program. For PLUS loans made before July 1, a variable rate applies (with a 9.00% cap).
6. The House passed a resolution in May 2013 to tie student loan rates to free market loan rates. Every year, student loan interest rates will adjust to fit the market. Also, subsidized and unsubsidized rates will cap at 8.5%.
Servicers of FFEL Loans
The United States Department of Education awards contracts to private companies to administer FFLP loans. Also, to receive payments from borrowers. Thus, 90% of the loans are administered by four organizations like:
- Pennsylvania Higher Education Assistance Agency.
- Navient Corporation (formerly part of Sallie Mae).
- Great Lakes Higher Education Corporation (subsidiary of Nelnet).
- Higher Education Loan Authority of the State of Missouri.
- Higher Education Services Corp. (New York).
- Granite State Management and Resources (New Hampshire).
- Oklahoma Student Loan Authority.
- CornerStone Education Loan Services (Utah).
Loan Forgiveness for FFEL Loans
You may ask: Can debt from FFEL loans be forgiven? The good news is that the answer is yes. You can qualify for FFEL loan forgiveness through a couple options.
- Public Service Loan Forgiveness (PSLF).
- Also, through Income-Driven Repayment.
The above are some of the vital information and updates on the FFEL loan. Do well to carry out more research.