Update on FFEL Discharge Process

A message from Luke Herrine
Legal Coordinator, the Debt Collective

Hi friends,

If you went to school before July 2010, your federal student loans may have been taken out under the FFEL program. These loans are issued and serviced by private companies (like Sallie Mae/Navient or Wells Fargo) and are guaranteed by the Department of Education. Your NSLDS profile should tell you if any of your loans are FFEL.

FFEL borrowers are supposed to have the same rights as Direct loan borrowers. But they don't. The Department of Education (ED) has said that because it does not issue or directly control the loans (it just guarantees private companies that they'll make money on them!), it cannot grant administrative forbearance to people who apply to DTR with FFEL. What is more, it has not provided any guidance to FFEL lenders/servicers about what they are supposed to do. So FFEL borrowers have been in limbo, waiting to see whether they can get forbearance and then discharges of their loans based on DTR.

Earlier this week ED had a conference call on how it will treat FFEL. It didn't clarify all that much. And what they did clarify doesn't sound good. There are no definite answers: people with FFEL still cannot apply to ED for DTR or get administrative forbearance. If you contact your servicer and tell them that you are contesting your loan and send them a DTR application, they might grant administrative forbearance. They likely won't adjudicate your claim, since ED still has not given them any guidance.

Once the new rules for DTR go into effect, folks with FFEL will be able to apply to ED for DTR on the unpaid portion of their loans. Then, if they are eligible for DTR, ED will tell them and allow them consolidate the unpaid portion into a direct loan (so that ED has direct control over it) and then have it discharged. Maybe ED will also issue guidance to private servicers so that folks can get refunds on paid portions. But this is far from guaranteed.

This is all confusing. And it's terrible. We are fighting to make it better (and we'll tell you how to help as things shape up). But for now the short answer is that not much has changed. That's why we're going to keep organizing and keep rabble rousing, just like this former Everest student who ripped up his diploma in front of the negotated rulemaking commmittee in Washington D.C.

(Art by Ami Schneider)

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