Student Debt Forgiveness May Be Within Reach for FFEL Loan Holders

• Those with a Family Federal Education Loan (FFEL) may not automatically qualify for debt relief under Biden's plan.
• However, experts say there is a way borrowers can benefit from the widespread relief.
• The president's administration is also reportedly searching for a workaround to the issue.

Many student loan borrowers celebrated President Joe Biden's August announcement that the government will forgive up to $10,000 or $20,000 in student loan debt for most borrowers.

However, some soon learned that their loans may not qualify for forgiveness. Details remain scarce concerning how holders of loans from the Federal Family Education Loans (FFEL) program can qualify for debt cancellation. However, the experts that BestColleges spoke to believe that relief is still within reach for many.

There may be some additional hoops borrowers must jump through to get that relief.

What Are FFEL Loans?

Biden's debt cancellation plan only applies to student loan debt held by the federal government.

While the FFEL program was a federal program, many of these loans aren't currently held by the federal government. The government transitioned to the Direct Loan program in 2010, but 9.6 million borrowers still held FFEL program debt taken out before then as of mid-2022, according to data from the Department of Education (ED).

About half of those borrowers' loans are already held by the federal government. This means their debt will be forgiven similarly to those with loans from the Direct Loan program.

Mark Kantrowitz, a student debt expert and author on the subject, told BestColleges that there are two main categories of FFEL borrowers whose debt is already held by the government rather than private companies:

• Loans made between 2008 and 2010 under the Ensuring Continued Access to Student Loans Act
• FFEL loans that went into default, for which a default claim was paid by a guaranty agency on behalf of ED

Commercially held FFEL loans are not eligible for the wider forgiveness promised to millions of other borrowers.

Borrowers can view whether ED holds their FFEL loans through their Federal Student Aid (FSA) account at StudentAid.gov. The "My Aid" section will have detailed loan information.

Not the End of the Road

Betsy Mayotte, founder and president of the Institute of Student Loan Advisors (TISLA), told BestColleges that borrowers with commercially held FFEL loans shouldn't panic. She said ED has promised more guidance will come for these approximately five million borrowers.

“The feds are advising FFEL borrowers to sit tight until that comes out,” she said.

That said, she reminded borrowers that the department's limited waiver for the Public Service Loan Forgiveness Program expires on Oct. 31. Those with FFEL loans who would be eligible for forgiveness through the waiver would have to consolidate their loan into the Direct Loan program to qualify.

Kantrowitz added that he suspects FFEL borrowers with commercially held loans will likely qualify for the wider forgiveness program if they consolidate their loan into a Federal Direct Consolidation Loan.

Kyra Taylor, staff attorney for the National Consumer Law Center, said during a recent panel from the Student Debt Crisis Center (SDCC) that now is a good time to consolidate FFEL loans into the Direct Loan program. Doing so if you have a commercially help FFEL loan would make borrowers eligible for this forgiveness program, she said.

Natalia Abrams, president and founder of the SDCC, also encouraged borrowers to consolidate. If you already benefited from the pandemic payment pause, however, it’s not necessary to consolidate because the loan would already qualify for forgiveness.

A representative from ED did not respond to multiple requests from BestCollege for guidance on what FFEL borrowers should do.