What is a FFEL PLUS Loan?
TL;DR: A FFEL PLUS Loan is a federal education loan from the Federal Family Education Loan (FFEL) program, which was active until 2010. It includes Parent PLUS Loans for parents of dependent undergraduate students and Graduate PLUS Loans for graduate students. These loans are issued by private lenders with federal government backing.
Navigating the world of student loans can be daunting, with a variety of loan programs and terms to consider. Among the available options, FFEL PLUS loans may come up, especially for those exploring federal loans from years past. If you’re a parent or a student delving into loan forgiveness, refinancing, or repayment strategies, understanding the FFEL PLUS Loan and its history is essential.
In this post, we’ll break down what a FFEL PLUS Loan is, its history, how it differs from other federal loans, and what current options are available for borrowers.
Understanding the FFEL Program
The Federal Family Education Loan (FFEL) program was one of the oldest student loan programs in the U.S., established in 1965. Under FFEL, private lenders issued loans that were then guaranteed by the federal government. The idea was to encourage banks and other financial institutions to invest in students by guaranteeing them against potential losses. This government-backed structure made FFEL a popular option for decades.
The FFEL program was discontinued in 2010, and today, all new federal student loans are issued directly by the government through the Direct Loan program. However, millions of borrowers still have outstanding FFEL loans, which can impact loan forgiveness and repayment options.
What is a FFEL PLUS Loan?
A FFEL PLUS Loan is a type of federal loan designed specifically to cover education expenses that aren’t met by other forms of financial aid. There are two main types of PLUS Loans under the FFEL program:
- Parent PLUS Loans – Available to parents of dependent undergraduate students, these loans allowed parents to borrow on behalf of their children.
- Graduate PLUS Loans – Offered to graduate and professional students, these loans covered additional costs that weren’t met by other federal aid.
Both types of FFEL PLUS Loans required a credit check but did not require proof of financial need. Borrowers were responsible for repaying the entire loan amount, along with interest, starting shortly after the loan was disbursed.
Key Differences Between FFEL and Direct Loans
One of the primary differences between FFEL loans and today’s Direct Loans is the lender. While FFEL loans were issued by private lenders with government backing, all Direct Loans are issued directly by the Department of Education. The change aimed to streamline the lending process, making it easier for borrowers to manage their loans with one federal servicer.
FFEL PLUS Loan Repayment Options
For FFEL PLUS Loan borrowers, navigating repayment can be complex. These loans are not eligible for some of the repayment and forgiveness options available to Direct Loan borrowers. However, some options are still accessible:
- Income-Based Repayment (IBR) – FFEL borrowers can consolidate their loans into a Direct Consolidation Loan, making them eligible for IBR. IBR adjusts monthly payments based on income and family size, which can make repayment more manageable.
- Public Service Loan Forgiveness (PSLF) – FFEL PLUS Loans don’t qualify directly for PSLF. However, if borrowers consolidate their FFEL loans into a Direct Consolidation Loan, they may qualify for PSLF if they meet other eligibility requirements.
- Extended and Graduated Repayment Plans – These options provide alternative ways to manage loan repayment by extending the repayment term or gradually increasing payments over time.
FFEL PLUS Loan Forgiveness: What Are the Options?
For borrowers seeking forgiveness, the pathway isn’t as straightforward as it is for Direct Loan borrowers. While FFEL loans, including PLUS loans, aren’t eligible for forgiveness programs like PSLF on their own, consolidating them into a Direct Loan can open some forgiveness doors.
The recent Limited PSLF Waiver and the IDR Adjustment programs have also offered opportunities for FFEL borrowers to have payments reconsidered for PSLF and other forgiveness programs.
Managing Your FFEL PLUS Loan Today
If you’re a borrower with a FFEL PLUS Loan, here are some steps to help you manage your repayment effectively:
- Check for Consolidation Opportunities – Consolidating your FFEL PLUS Loans into a Direct Consolidation Loan can give you access to more repayment and forgiveness options.
- Use Income-Driven Repayment (IDR) Plans – IDR plans can lower your monthly payment based on your income, providing more financial flexibility.
- Keep Up with Legislative Changes – With evolving federal loan policies, it’s essential to stay informed on new options that may help FFEL borrowers with repayment or forgiveness. Programs like the IDR Adjustment or temporary PSLF waivers may provide new opportunities.
Conclusion
While the FFEL program ended in 2010, FFEL PLUS loans continue to impact many borrowers today. By understanding the unique features of FFEL PLUS Loans, you can better navigate repayment, find suitable consolidation or forgiveness options, and keep up with legislative updates that may impact your financial future.
Disclaimer: The information provided in this post is for general informational purposes only and should not be considered financial advice. Student loan situations can vary significantly based on individual circumstances, and decisions around deferment or forbearance can have lasting financial impacts. Before making any changes to your loan repayment plan, consult a qualified financial advisor or your loan servicer to understand the best options for your unique situation.