What is the Federal Family Education Loan Program?
FFEL Program Overview
Prior to 2010, all federal lending occurred under two programs: the Federal Family Education Loan Program and the Direct Loan Program. The Federal Perkins Loan is a separate program. According to the U.S. Department of Education, FFEL began in 1965, and from its inception through 2009, provided over $878 billion in lending. Nearly three decades later, the Higher Education Amendments of 1992 created the Direct Loan Program. From July 1, 1994, through 2011 alone, the Direct Loan Program has provided $292 billion in lending.
However, as the U.S. Department of Education reports, no new loans are being made under the Federal Family Education Loan Program (FFEL or FFELP). FFEL ended with the enactment of the Health Care and Education Reconciliation Act of 2010. As of July 1, 2010, all FFEL loans ceased. But student borrowers were not left in the lurch; after the law changed, all federal student loans (not including Perkins Loans) came under the administration of the Direct Loan Program. The FFEL program included Stafford, PLUS, and Consolidation Loans. But to avoid confusion, it is important to note that the Direct Loan Program also included (and still includes) Stafford, PLUS, and Consolidation Loans.
As President Obama remarked on the topic of higher education, the elimination of FFEL was a measure to save taxpayers billions of dollars each year. The FFEL program, as it was structured, involved banks serving as costly intermediaries between the federal government and student borrowers. The Direct Loan Program does not involve a middleman, since the federal government lends directly to borrowers, and it is therefore more administratively cost-effective.
Repayment of FFEL
FFEL has not been phased out to the extent that borrowers under this program are required to repay their loans, and these loans have retained their original titles. According to Federal Student Aid, the following repayment plans are available for FFEL Subsidized and Unsubsidized Stafford Loans, and the additional loans noted below:
- Standard Repayment Plan: FFEL PLUS Loans
- Graduated Repayment Plan: FFEL PLUS Loans
- Extended Repayment Plan: FFEL PLUS Loans
- Income-Based Repayment Plan: FFEL PLUS Loans (only those made to students), and FFEL Consolidation Loans (excluding PLUS Loans to parents)
- Income-Sensitive Repayment Plan: FFEL PLUS Loans, and FFEL Consolidation Loans
Borrowers interested in the Pay As You Earn Repayment Plan or Income-Contingent Repayment Plan should contact their loan servicer to learn about a Direct Consolidation Loan.
Income-Sensitive Repayment Plan
According to Federal Student Aid, highlights of this plan include:
- Only available to FFEL borrowers
- 10-year repayment period
- Based on annual income (monthly payments can therefore increase or decrease)
- The loan servicer or lender can enroll a borrower in this plan
FFEL loans are either under the ownership of the U.S. Department of Education or another lending entity. Borrowers who need information on which organization owns their loans can check via the National Student Loan Data System.
Public Service Loan Forgiveness Program
According to Federal Student Aid, FFEL loans are not eligible for this program. An FFEL borrower may consolidate their FFEL loans into a new Direct Consolidation Loan and thereby qualify for the program. Only payments that are made under the new Direct Consolidation Loan will count toward the 120 payment requirement for public service forgiveness.