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    How To Consolidate FFEL Loans For Student Loan Forgiveness Program

    FFEL

    Although a post-secondary education can set a person on the path to a lucrative and fulfilling career, the cost of learning is a massive obstacle for many. Tuition costs have more than doubled since 1978, meaning most families can’t cover them out of pocket.

    As a result, most university hopefuls end up taking out a student loan to cover their tuition and living expenses. This has resulted in borrowers owing over $1.6 trillion in student debt.

    While there are many federal loan programs, one of the most popular and well-known programs was called the federal family education loan program. 

    Federal Family Education Loan Program - A Brief History

    The federal family education loan program (commonly referred to as FFEL) was created through the Higher Education Act of 1965 as a means of combating rising tuition costs. For several decades, this program was the single largest source of federal student loans until it was discontinued and replaced in 2010 by the William D. Ford direct loan program.

    FFEL loans were issued by private lenders and not directly by the Federal government. However, the government did guarantee the loans, meaning that if a borrower defaulted on their loan, the Federal government is required to pay off the outstanding balance.

    Even though these loans are no longer issued, any outstanding balances must still be paid off. As of January 2020, nearly $300 million in FFEL loans are still outstanding. Furthermore, even though the program is now defunct, the Federal government is still required to guarantee the loans.

    What Types Of Loans Were Available Under The FFEL Program

    The federal family education loan program consisted of various types of loans, although four make up most of the FFEL loans that are currently outstanding.

    • Stafford loans: These were primarily for undergraduate students but were also handed out to graduate students. These were subsidized loans, meaning the interest payments are handled in part, or all, by the Federal government
    • Unsubsidized Stafford loans: These are similar to standard Stafford loans, although interest is charged continuously throughout the life of the loan
    • Federal PLUS loans: These are also similar to Stafford loans but could be taken out in the students' parents' name instead
    • Federal consolidation loans: These types of loans were used to consolidate FFEL loans into a single monthly payment. A federal consolidation loan allowed borrowers to combine any type of FFEL or other federal student loan debt into a single monthly payment

    FFEL Loans And Student Loan Forgiveness 

    When it comes time to repay one's student loan, there are several repayment options available. One of the most common options is an income-driven repayment plan (IDR). An IDR allows those who carry federal student loans to develop a monthly repayment plan based on their current income level. After 20 or 25 years, if the loan still has a balance then it’s usually forgiven, providing the debtor has consistently made their monthly payments throughout the past two decades. 

    Unfortunately, these loans aren’t eligible for forgiveness through an IDR plan unless they’ve been converted into a direct consolidation loan. Even then, they still may not qualify. 

    Consolidation Of FFEL Loans

    Since these loans aren’t available for forgiveness through an IDR, many borrowers look for alternative options to better manage their debt load. One of the best ways to do this is through the direct consolidation loan granted by the U.S. Department Of Education. This type of lending product is an example of a federal loan for student loan forgiveness.

    It’s essential to note that the interest rate for a direct consolidation loan is determined by taking the weighted average of all of one's student loans and rounding that number up to the nearest 1/8th of a percent. Thus, some individuals may find that their average interest rate actually increases when they enroll in this program.

    Those in this situation may consider exploring private consolidation loans as an alternative option. People with a good credit score may qualify for lower interest rates than they’d otherwise receive through a direct consolidation loan program. Conversely, not all types of student loans may be eligible for this loan. Therefore, the borrower will have to explore options available to them through private lenders.

    The Bottom Line

    Thousands of Americans still carry balances from their FFEL student loans, making these lending products one of the most common forms of student loan debt. Unlike other student loans that were issued directly by the government, private institutions issued these loans, meaning they can’t be written