Millions of borrowers who were barred from Biden’s federal student loan forgiveness plan that waives $10,000 to $20,000 per borrower below a certain income threshold can still reap the benefits. About five million Americans hold what is called a Federal Family Education Loan (FFEL), one of the first types of federal loans available to college applicants – and so far they have been excluded from Biden’s actions regarding the cancellation of student loans. Why? And what can Biden do to help them? Here’s what you need to know.
From the 1960s until 2010, when they were phased out, FFEL loans were a common lending vehicle for those looking to further their education. The loans were held by private companies but backed by the government. So after Biden’s announcement that $10,000 of debt would be forgiven for those with federal loans and up to $20,000 for Pell Grant recipients, the millions of FFEL borrowers were left behind, still holding their debt – because these loans are held commercially, even though they are backed by the government. Frustrating, yes.
But there is a silver lining on the horizon for these borrowers. The Ministry of Education has announced that it is studying workarounds for FFEL holders.
“The Biden administration is cutting red tape and saying millions of previously overlooked borrowers will be included in its bold student debt relief plan,” said Ben Kaufman, director of research and investigations at Student Borrower Protection. Center. CNBC.
Of the 10 million FFEL loans still in repayment, about half are currently owned by the government, either due to default or an initiative taken in 2008 by the government to buy back these loans for a period of economic downturn. If your FFEL loan was eligible for the pandemic payment pause, it is already eligible for loan forgiveness.
But the approximately five million remaining borrowers of the FFEL can still benefit from loan forgiveness. They just need to take a few extra steps and wade through a little more paperwork.
According to New York Times, FFEL borrowers with loans held for business purposes can consolidate their debt into a federally supported direct lending program, making them eligible for loan forgiveness. To consolidate your FFEL into a direct loan, contact your loan officer or visit StudentAid.gov and follow the steps provided.
There’s currently no published deadline for consolidation, but analysts expect it’s better to move to consolidating your loans sooner rather than later.