Covid-19 Stimulus Package: FFEL Loans

What exactly is what is an FFEL Loan?

The FFEL (Federal Family Education Loan Program) loan is a federal student loan which was established (funded) through an organization different from that of the US Education Department (USED). This could include a financial institution or an institution like a credit union (Sallie Mae, Chase, Wells Fargo, etc. ) as well as an agency for guarantee (VSAC, Great Lakes, MOHELA and others.) The loan is insured (insured) via USED and that’s the reason it is an Federal student loan.

If your credit is good, you’ll receive invoices from the lender or the servicer working with the lender. If you fail to pay the loan, it is remitted to a guarantee company (unless it was arranged by a guarantee agency, in which case they will keep the loan). The guarantee agency is granted the same rights in the same way as USED to collect wages – garnishment and social security offset tax refunds intercepted and lawsuits. The guarantee agency can also choose to submit a claim, and then transfer your loan to USED. This is a crucial issue which will be covered in detail later.

Stimulus Help?

Sorry, no. The stimulus will only help the loans held by USED. FFEL loans are not typically owned by USED. The options you have here are contingent on the condition the loan is in.

Good Standing

In the event that you’re FFEL loans are in good condition, you will receive no stimulus benefits. If you’re struggling to keep up with your monthly payments, you’ll have three options:

• Make use of a deferred or forbearance
• Inscribing yourself to IBR or if already in IBR Request an adjustment based on lower earnings
• Consolidate into Direct Loans and then get the advantages that the stimulus program offers. Be aware that when you do this and you’re already on IBR and you lose the amount of time you’ve accrued to IBR forgiveness. Take your time.

If you need help deciding on the most suitable option, schedule an appointment.

In default

If you’re FELL the loan has fallen into default there might be a benefits. Remember the previous paragraph concerning guarantee agencies transferring defaulted loans over to be USED? This will determine if you are eligible for an advantage. It is important to determine who owns the loan. If you’re not certain visit studentaid.gov to check the details of your FFEL loan. (Directions here). Does it read USED (or DRG) (Default Resolution Group)? If so, you get a benefit. If not, there are no protection.

FFEL not compatible with USED

As you do not have protection, it is worth taking this loan out of default as quickly as possible. It is possible to do this by rehabilitating or consolidating. If you require help in planning your path or how to get it implemented, schedule an appointment.

FFEL with USED

You got lucky! FFEL loans held by USED receive the following protections by the stimulus program:

• Interest rate cut to 0 percent
• All collection activity ceases
• The garnishments on your wages stop (you have to contact your employer to ask them to stop)
• Social Security offsets stop – from March 13 and into 2020.
• Tax refund offsets stop If it was being processed prior to March 13 2020, you’ll receive your refund. If the refund was received prior to this date we’re sorry to inform you that you won’t receive it back.
• Rehabilitation payments are no longer needed However, you’ll still be able to get credit for 6 months of payments.
• There aren’t any debt collectors calling, or writing letters to solicit payment.