FFELP student loan borrowers: take full advantage of fixes to Income-Driven Repayment

Under income-driven repayment (IDR) plans, federal student loan borrowers can have the remaining balance of their student loans forgiven after 20 or 25 years of qualifying payments. On April 19, the Department of Education (ED) announced that it will give borrowers credit toward loan forgiveness for some months that were not counted previously.

This action can also benefit borrowers with loans made under the Federal Family Education Loan Program (FFELP) if they consolidate into Direct Loans. Because FFELP loans tend to be older, these borrowers could make substantial progress toward loan forgiveness—and potentially get their loans forgiven.

The Education Department’s IDR fix

ED will do a one-time adjustment to count any month spent in repayment, some deferment periods (prior to 2013), and some forbearance periods toward loan forgiveness. For some borrowers, these changes mean that they will receive additional years of credit toward loan forgiveness. If you have loans that have been in repayment for more than 20 or 25 years, those loans may immediately qualify for forgiveness. TIP: No student loan borrower will have to pay any fees to receive their credit toward forgiveness. If someone asks you to pay them to get you loan forgiveness, it’s a scam.

Who will benefit?

Borrowers with Direct Loans or federally-managed FFELP loans that are owned by ED

You will not have to take any action in order to benefit under ED’s IDR fix. (These loans are also referred to as “federally-owned.”)

Borrowers with commercial FFELP loans that are not owned by ED

If you have a commercial FFELP loan, you can benefit from the IDR fix if you consolidate your FFELP loans into Direct Loans before ED completes implementation of its plans. ED estimates this will be no sooner than January 1, 2023. Apply as soon as possible, as the consolidation process takes about a month.

You can apply for a Direct Consolidation Loan online or with a paper form . There are no fees and no credit check. The interest rate on a consolidation loan is based on the weighted average of the consolidated loans’ rates, effectively locking in the rates you’re being charged now. New Direct Consolidation Loans will become immediately eligible for the COVID relief measures for government-owned student loans, including 0% interest and the ongoing monthly payment pause.

Not sure what kind of loans you have?

Log into StudentAid.gov using your FSA ID and select “My Aid” under your name. That page will display information about your federal loan amounts, including whether your loans are Direct or commercial FFELP.

Commercial FFELP servicers must provide accurate information about the IDR fix

As the CFPB has documented for years, shoddy student loan servicing has derailed borrowers from making progress toward loan forgiveness under existing federal programs, including income-driven repayment (IDR).

Failure by commercial FFELP servicers to provide the information, support, and processing that consumers need to access relief under the Department’s IDR fix is not acceptable. The CFPB’s supervisory findings have previously identified misrepresentations about loan forgiveness at multiple FFELP servicers, leading to enhanced scrutiny of servicers’ practices. And last month, the Bureau took enforcement action against a FFELP servicer for making deceptive statements to student loan borrowers about the forgiveness options available to them. The CFPB is committed to monitoring the industry for illegal practices and ensuring that student loan borrowers can access the relief that federal programs intend for them.

Borrowers can help hold student loan servicers accountable. If you’re experiencing a problem with income-driven repayment plans or student loans, you can submit a complaint to the CFPB online or by calling (855) 411-2372. We will continue to use complaints to hold companies accountable in our enforcement and compliance work.