What is an FFEL Loan?
An FFEL (Federal Family Education Loan program) loan is a federal student loan that was originated (funded) by an entity other than the US Education Department (USED). It could be a bank or a credit union (Sallie Mae, Chase, Wells Fargo, etc.), or even a guarantee agency (VSAC, Great Lakes, MOHELA, etc.) The loan is guaranteed (insured) by USED, which is what makes it a Federal student loan.
When the loan is in good standing, you will receive bills from the lender or a servicer working for the lender. If you default, the loan is transferred to a guarantee agency (unless it was originated by such agency, then they keep it). The guarantee agency has the same powers as USED to collect – wage garnishment, social security offset, tax refund intercept, and lawsuits. The guarantee agency also has the option to file a claim and turn your loan over to USED. This is an important issue discussed in a bit.
Sorry, no. The stimulus only helps loans held by USED. FFEL loans are not often held by USED. Your options from here are based on the status of your loan.
If your FFEL loan is in good standing, you get no benefits from the stimulus. If you’re having difficulty maintaining your payments, you have three choices:
- Use a forbearance or deferment
- Enroll in IBR, or if you’re already on IBR, request a recalculation based on decreased earnings
- Consolidate to Direct Loans and then get the benefits of the stimulus. NOTE, if you do this and you’re on IBR, you will lose any time you’ve accumulated towards IBR forgiveness. Think carefully.
If you want assistance in deciding which is the best path, schedule an appointment.
If your FELL loan is in default, well there may be some stimulus benefit. Remember the part above about guarantee agencies turning defaulted loans over to USED? That is going to determine if you get a benefit. You need to verify who is holding the loan. If you’re not sure, go to studentaid.gov to look at your FFEL loan. (Directions here). Does it say USED or DRG (Default Resolution Group)? If so, you get a benefit. If not, you get no protections
FFEL not with USED
Since you get no protection, you should consider getting this loan out of default as soon as you can. You can do that through consolidation or rehabilitation. If you need help planning a path and/or how to implement it, schedule an appointment.
FFEL with USED
You got lucky! FFEL Loans held by USED get the following protects through the stimulus:
- Interest rate reduced to 0%
- All collection activity stops
- Wage garnishments stop (you must contact your employer to make them stop)
- Social Security offsets stop – as of March 13, 2020
- Tax refund offset stops – if it was in process after March 13, 2020, you’ll get your refund. If your refund was taken prior to this date, sorry, you may not get it back.
- Rehabilitation payments no longer required BUT YOU’LL STILL GET CREDIT for 6-months of payments.
- No debt collectors calling or sending letters to collect.
Now is an EXCELLENT time to fix your defaulted loan and get it back to good standing. Life will eventually return to normal. Here’s your chance to have your loan start normally too! Want help figuring out the best way to do that? Schedule an appointment.