Home » Repayment » Student Loan Forgiveness » Consolidation of FFEL Federal Loans for Student Loan Forgiveness

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

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.

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

  1. I have FFELP loans on which I paid 120 payments while working for a qualifying employer. My own failure to better educate myself prevented me from applying for PSLF initially, but now that I have the opportunity to apply under the new, extended guidelines, I don’t want to make a mistake.

    I know I have to apply for federal direct loan consolidation to apply for PSLF/TEPSLF; however, I also have a federal direct Plus loan I borrowed in 2018 for my daughter on which I made payments until the current pause on loan repayments. Can I apply to consolidate only the FFELP loans on which I have made the qualifying payments and have two federal direct loans? If I have to consolidate the FFELP and the direct Plus loan into one loan, will that disqualify me for loan forgiveness under PSLF/TEPSLF?

    • That is a tricky situation Amy.

      You are allowed to consolidate all of the loans into a single loan. However, including the Parent PLUS loans means that the new consolidated loan would only qualify for the ICR repayment plan (which has much higher monthly payments than the rest of the IDR plans).

      However, it is possible that by combining all of your loans together, you could get all of the debt forgiven under PSLF if your 120 prior payments are certified.

      I’d encourage you to work with your servicer to identify the pros and cons of each option as they apply to your specific loans.

  2. I have a commercially-held FFEL Loan, making payments since 2006 under IDR. If I convert this loan into a Direct loan, would this wipe out my progress toward forgiveness?

    The below information is from the Forbes article that talks

    The Education Department also indicated that it will count payments towards loan forgiveness under PSLF and IDR programs that were made prior to federal loan consolation. This could have huge implications for borrowers since consolidation typically “restarts the clock” on a borrower’s IDR loan repayment term. Hundreds of thousands of borrowers may ultimately get advanced much closer to loan forgiveness as a result.

  3. This is great info, I have a pretty unique situation. My mother has an consolidated FFEL , that was originally a Parent PLUS. My father passed away a few months ago, and she is looking for payment relief.
    Our servicer , Navient, says she’s not eligible for any IBR. They quote “Unfortunately, Parent PLUS Loans or any consolidation loans that repaid a Parent PLUS Loan are not eligible for IBR. ”
    Can I convert this to a direct loan somehow? Does she have any options to lower her payment? She’s 82 and really needs help.

    • I think I can explain the miscommunication between you and your servicer. You seem to be asking about Income-Driven Repayment (IDR) plans. IDR plans allow borrowers to make payments based upon what they earn each year, so for many borrowers, it can mean $0 per month payments. IBR, the plan you asked about is one of the many IDR plans. It would be correct for Navient to say that your mom can’t qualify for IBR, but it is wrong to say that she can’t qualify for any IDR plan.

      It’s ridiculous that these plans all sound so similar, but the plan that you want to get her signed up for is Income-Contingent Repayment (ICR). Federal direct consolidation is an option to get the loans eligible for ICR.

  4. Thank you for the article.
    I have a question. I have Stafford Subsidized and Unsubsidized FFELP loans. I have not figured up total payments yet, but I am guessing I will be around 24 payments or so shy of 120.
    I have been scared of consolidating for the fear of payments being higher. I pay based on IBR.
    If I consolidate them am I still eligible to pay based on IBR? And if so are the payments still reasonable?

  5. I originally had loans dating back to 1990-1994. They are now FFEL loans. I worked for a qualifying school district for 20 years. If I consolidate to a Direct Loan under this temporary program, will my loans still be eligible for the PSLF even though they were originally old? I had heard something about them having to be after 1997.

  6. I consolidated my student loans to a single FFEL loan in 2006. Am I understanding correctly, there is nothing I can do to convert this consolidated FFEL loan into a Direct loan?

  7. Do I need other loans in addition to my FFEL loan in order to apply for a direct loan consolidation? It appears from the name that if you only have a FFEL loan, you can’t “consolidate” it into a direct consolidation loan to take advantage of PSLF.

  8. Great and useful website. I have three FFEL loans that are worth about $60k. I have about $230k of direct loans (direct grad plus, direct subsidized/unsub, and one weird direct consolidated unsubsidized loan [for about $7k from 2006]). I’ve never certified for PSLF before but Im about 7 years into government service. My question is…to take advantage of the PSLF waiver for the FFEL loans should I just consolidate the FFEL loans only? Or should I consolidate everything and then submit the PSLF cert form? I dont believe I had any qualifying payments on the weird direct consolidated loan prior to it being consolidated (which i dont even remember doing)…since I read a second consolidation will wipe out prior payments made before the first consolidation….but this loan is only $7k anyway so I’m not super worried about it. Any help and insight would be awesome. I dont trust the service center reps.

    • Consolidation usually wipes out prior payments. However, in the case of the limited waiver, it does not.

      I get your concern about not trusting your servicer as I’ve gotten bad info from them myself. I find the best way to resolve these issues is to compare what I’m told with the information on the Department of Education website. They recently updated the Limited Waiver information and the details covered are excellent.

  9. I received a letter from my loan servicing AES stating my FFELP loan did not qualify forgiveness under the PSLF Program; however, I may be able to take advantage of the limited waiver if I apply to consolidate my loan into a new direct consolidation loan. I am not sure where to begin this process and how consolidation will affect my payment.

  10. 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.


Leave a Comment