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Consolidation of FFEL Federal Loans for Student Loan Forgiveness

New rules mean borrowers with FFEL loans can qualify for Public Service Student Loan Forgiveness, but consolidation is a required first step.

Written By: Michael P. Lux, Esq.


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Consolidation of FFEL Federal Loans for Student Loan Forgiveness

New rules mean borrowers with FFEL loans can qualify for Public Service Student Loan Forgiveness, but consolidation is a required first step.

Written By: Michael P. Lux, Esq.


Affiliate Disclosure and Integrity Pledge

For many years, FFEL loans have caused headaches for borrowers seeking Public Service Student Loan Forgiveness.

Many borrowers spent years working in public service only to learn that their time didn’t count because FFEL loans are not technically eligible for PSLF. Consolidation fixes the eligibility problem, but it used to mean that borrowers had to start the student loan clock from scratch.

Fortunately, recent changes made by the Department of Education now allow borrowers to count their time before and after consolidation towards the required ten years of service.

Some borrowers will even qualify for a large refund of previous payments.

The New Rules for Getting FFEL Loans to Qualify for Public Service Loan Forgiveness

Let’s start with a basic fact: Federal Family Education Loans (FFEL) are not eligible for Public Service Student Loan Forgiveness.

The way to fix this issue is federal direct consolidation. Federal consolidation eliminates the old FFEL loan and replaces it with a new federal direct consolidated loan.

The recent limited waiver from the Department of Education now allows borrowers to count the time before consolidation towards PSLF. Previously, this time did not count.

Important Deadline: The expanded FFEL rules only apply until October 31, 2022.

The Department of Education has limited authority under the CARES Act to count the old FFEL payments towards PSLF. If you fail to consolidate before the deadline, the payments made before consolidation will not count.

FFEL Loan Example

Today’s topic is one of the more advanced federal student loan issues, but it affects many borrowers and is an easy mistake to make.

Let’s start with what a common scenario looked like under the old rules:

  • The borrower gets $200,000 to pay for medical school (though this issue applies to any graduate program).
  • The borrower takes a public interest job, intending to have student loan debt forgiven after ten years.
  • To qualify for public service forgiveness, the borrower signs up for a repayment plan based upon their income.
  • The lender tells the borrower that their payments will count towards the 120 payments needed for public service forgiveness.
  • After several years of making these payments, the borrower learns that because some of the loans were graduate PLUS loans made under the FFEL program, they are not eligible for public service student loan forgiveness.
  • The borrower has to make student loan payments for several years extra because of this mistake.

As a result of this sequence, many borrowers lost years towards Public Service Loan Forgiveness

The Issue with FFEL Loans and Public Service Student Loan Forgiveness

The most frustrating part about this example is the fact that this borrower could have had all their loans eligible for public service forgiveness had they consolidated from day one.

Many customer service representatives did not understand this wrinkle in student loan law. It is a classic example of the dangers of relying on your student loan servicer.

Fortunately, the expanded rules now help borrowers who consolidate before the deadline.

What loans does this apply to?

This is an issue with most commonly associated with FFEL loans, but it also applies to Federal Perkins Loans. The Federal Family Education Loan Program was in existence from the mid-’60s until 2010. Under the FFEL program, borrowers got federally insured loans through private companies.

If you received a Stafford Loan or a Graduate PLUS loan before 2010, you probably have an FFEL loan.

What to do with FFEL Loans?

Borrowers can include FFEL Loans (with the notable exception of Parent PLUS loans) in a federal direct consolidation. By consolidating, the FFEL loan becomes a Direct Loan eligible for forgiveness under the Public Service Student loan forgiveness (PSLF) program.

Historically, borrowers had to weigh the pros and cons of consolidation and restarting the clock towards forgiveness. Consolidation allowed the PSLF clock to finally start, but it meant going back to zero on the progress towards forgiveness under an income-driven repayment plan.

Under the new rules, the decision to consolidate is more straightforward, because payments made before consoldiation now count towards PSLF.

A Note from the Sherpa: Handling FFEL loans is not the only factor to think about when consolidating federal loans. Borrowers should understand the consolidation process and exercise special care with Parent PLUS loans.

How do I avoid screwing this up?

If you have multiple student loans, go to the National Student Loan Database. Look for any Stafford, Perkins, or PLUS loan. Better yet, call or write your lender, and go loan by loan to verify whether your loans are federal direct loans or FFEL.

If you have FFEL loans, get them consolidated as soon as possible so that you can start making payments on them that count towards Public Service Student Loan Forgiveness.

One way to check whether or not you are doing things right would be to have some of your payments certified towards PSLF. If you can only get some loans certified and other loans don’t count, you may have an FFEL problem.

This is not an easy subject, but by identifying that you might have an FFEL problem, you can ask the right questions to your lender and get things under control. You can also warn your friends who may have the same issue.

Most importantly, if you have FFEL loans and want to count your previous payments towards PSLF, be sure to conoslidate before October 31, 2022.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

67 thoughts on “Consolidation of FFEL Federal Loans for Student Loan Forgiveness”

  1. I graduated from law school in May 2011, my loan grace period ended 6 months later, and I entered repayment in November 2011. My loans included Direct loans, FFELP loans, and Perkins Loan.

    I started working full time at a nonprofit October 2011.

    Although I entered repayment November 2011, I did not consolidate my loans until May 2012. Even though the original loans were closed/consolidated May 2012, the consolidated loans entered repayment in August 2012. Note: I made payments in June and July 2012 that currently don’t qualify because the accounts were apparently in forbearance while the loan consolidation processed. At the time I was told to continue making payments.

    It’s my understanding that the Perkins and FFEL payments I made between November 2011 and the date of consolidation (May 2012 or August 2012) would qualify under the limited waiver PSLF program. However, when I used the PSLF Tool on the Department of Education website, the tool does not acknowledge that I’ve been in repayment for more than 10 years. It appears that the tool does not count the payments I made prior to consolidation.

    Since the limited waiver announcement, I have submitted a new employment certification form for the time that I was working at nonprofits between November 2011 and August 2012 via my loan service provider FedLoans.

    Today, the service agent told me that they will not process the employer certification forms that correspond with the dates after the loan was consolidated.

    This is confusing. Will the Department of Ed count the payments made on my unconsolidated loans (November – May/August 2012) under the new rules? And if so, who is making that determination? Employees at the loan service provider that has decided not to renew its contract and has no incentive besides the legal implications the “Dear Colleague” letter from the Department of Ed to the service providers?

    Is it likely this will be sorted before May 2021? Would you advice borrowers who have made 120 payments while employed at a qualified employer, and who believe their 120 payments quality, to defer payment starting May 2021 until Department of Ed finishes review?

    • Great questions.

      First, I’d start by saying I would not read too much into what the PSLF Tool or random call customer service representatives say. The limited waiver ends in October, so the Dept. of Education isn’t going to make a ton of fundamental changes to the online tools, and I’ve heard from plenty of people who received inaccurate info from their servicer.

      The Department of Education is saying that the limited waiver processing should be finished by spring, but that is far from a certainty.

      That said, I suggest that you keep making payments while the review is ongoing. My reasoning is that if you are found to have been eligible, you will get a refund for the extra payments. If your math was off by a couple of months, I don’t want you to miss out on that time. However, if making the “extra” payments is a hardship and your job isn’t changing, I can see the argument for the deferment pending certification.


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