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Only 6.7% of people eligible for Public Student Loan Forgiveness actually apply for it.
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Some FFEL loans are federally-backed student loans held by private student loan servicers, and others are held by the US government.
Private FFEL loans are not eligible for Biden’s forgiveness plan. You need to consolidate to a Direct loan to qualify.
Here’s how to apply for Direct loan consolidation, and the pros and cons of doing it.
You could miss out on student-loan forgiveness simply because you have the wrong loan type.
President Biden’s $10,000 forgiveness plan, and $20,000 for Pell Grant recipients, only applies to student loans owned by the federal government. And some FFEL loans are not currently eligible.
Student loan expert Sonia Lewis of the Student Loan Doctor explains, “FFEL loans are federally-backed loans that were funded by a private company.”
Because some FFEL loans are serviced by private lenders, they are not eligible for student-loan forgiveness and other government protections, like the pandemic payment pause. The Biden administration says it’s working on getting forgiveness for people with privately-held FFEL loans, but there’s no specific timeline or information at the moment.
However, some FFEL loans are already held by the US government through servicers like Nelnet or MOHELA. Those loans already qualify for student-loan forgiveness; if your FFEL loans have been on pause during the pandemic, they’re eligible for forgiveness.
If your FFEL loans are privately held, you’ll need to consolidate them into Direct loans that are owned by the government to qualify for forgiveness. Here’s how to do it.
How to fill out a Direct loan consolidation application
The first step is to fill out a Direct loan consolidation application at studentaid.gov. You’ll need to login to start the application, but you can also use a read-only or demo application to prepare for the real application.
You’ll need to provide:
Your full name and any former namesYour Social Security numberYour date of birthYour permanent addressYour telephone numberYour email addressYour employer’s name, address, and phone number
You’ll also need to provide two references — two adults who live in the US who do not live with you, and who have known you for at least three years. You’ll need to provide the following information about your references:
Phone numberEmail addressMailing address
After filling out your information and providing references, the next section in the application is titled Loans I want to consolidate. Here’s what this part of the application will look like:
This is the part of the Direct consolidation application where you choose which loans you want to consolidate.
studentaid.gov
Only consolidate loans that are not Direct loans.
Once you’ve finished with that section, you’ll fill out the next section, titled Loans I don’t want to consolidate. You’ll list any other student loans you want the federal government to consider when deciding your maximum repayment period.
Choose your new servicer
After choosing the loans you do and don’t want to consolidate, you’ll be asked to choose a new federal student loan servicer.
Here’s a list of federal loan servicers, and details about each one from the Better Business Bureau:
Federal loan servicerBBB accreditationBBB ratingCustomer ratingComplaints closed in the last 3 yearsGreat Lakes Educational Loan Services, Inc.Not accreditedN/A1/5 stars61EdfinancialAccredited since 2008B+1/5 stars75MOHELAAccredited since 2010A+1.1/5 stars42AidvantageNot accreditedC-1/5 stars34NelnetAccredited since 2005A+1.4/5 stars291OSLA ServicingNot accreditedN/A1/5 stars16ECSINot accreditedB-1/5 stars68
Sign a new promissory note
Just like you did when you went to college, you’ll have to sign a promissory note, an agreement between you and the government stating that you will pay your debts. Lewis says, “Basically, you’re originating a new loan with this government, so you should look at it as such.”
Your Direct consolidation application will include a hard credit inquiry, which means you might see a five- to 30-point drop in your credit score, says Lewis.
What are the pros of consolidating my FFEL loans?
If you consolidate your FFEL loans, you will become eligible for Biden’s $10,000 student-loan forgiveness plan, or $20,000 if you received a Pell Grant (provided you meet the income threshold of $125,000 per year for an individual or $250,000 for married couples who file their taxes jointly).
Additionally, you may be eligible for lower monthly payments. FFEL loans, which were discontinued in 2010, are only eligible for select federal income-driven repayment plans. By consolidating into a Direct loan, you become eligible for more IDR options.
What will I lose if I consolidate my FFEL student loans?
If you were paying your FFEL loan with an income-based repayment plan, all of the payments you’ve made toward forgiveness will be erased if you consolidate now. You would have to start the clock over again once you consolidate your student loans.
The same typically goes for Public Service Loan Forgiveness, though your payments will qualify under the temporary PSLF waiver until the end of October.
Here’s how long federal student loans take to be forgiven under specific IDR plans:
Repayment plan or forgiveness programForgiveness dateRevised Pay As You Earn (REPAYE)20 years for undergraduate loans, 25 years for graduate loansPay As You Earn Plan (PAYE)20 yearsIncome-Based Repayment (IBR)20 yearsIncome-Contingent Repayment (ICR)25 yearsPublic Service Loan Forgiveness Program (PSLF)10 yearsPerkins Loans5 years