A few days ago I got a question that I knew needed to be answered from a woman who works at the U.S Department of Transportation, so I turned to my friend Mark from savingforcollege.com to get the best answer possible. I've left some of her specific details out, but the core of her questions was, "should I consolidate my loan FFEL Loan to a Direct Loan to take advantage of federal student loan relief?". Here is Mark's Response: FFELP loans are not eligible for public service loan forgiveness (PSLF). Consolidating them into the Direct Loan program would make them eligible, but the qualifying payment count starts at zero, even if the loans were in the income-based repayment plan in FFELP and even if the borrower was working full-time for a qualifying public service job. (PSLF is per loan, not per borrower, so consolidating resets the clock because the Federal Direct Consolidation Loan is a new loan.) The Heroes Act, which has passed the House but is stalled in the Senate, includes a provision to give credit for qualifying payments made while loans were in FFELP if they are consolidated into the Direct Loan program. The provision is pretty narrow and it is unclear whether it will be included in final legislation, even if the Senate decides to introduce their own legislation or to pass the House legislation with amendments. The CARES Act provides a payment pause and interest waiver on federal student and parent loans that are held by the U.S. Department of Education. This includes all Direct Loans. It also includes certain FFELP loans made in 2008-09 and 2009-10 for which title was transferred to the U.S. Department of Education under the Ensuring Continued Access to Student Loans Act (ECASLA). It does not include FFELP loans that are held by banks or other commercial lenders, not state lenders. It does not include private student loans. The Heroes Act includes a proposal to not only extend the payment pause and interest waiver by a year, to September 30, 2021, but to also expand eligibility to include all FFELP loans and private student loans. Again, it is unclear if the legislation will become law and whether this proposal will be included in the final legislation. One can consolidate FFELP loans into the Direct Loan program to make them eligible for the payment pause and interest waiver. Since it takes about a month to consolidate federal loans, this means about two months of payment pause and interest waiver if the borrower were to consolidate their loans now. The fact that Nelnet did not get selected as a Direct Loan servicer is irrelevant, as it does not affect eligibility for the payment pause and interest waiver. Nelnet will continue to service any FFELP loans it holds. Plus, they will likely take legal action to retain their servicing rights. Plus, the five servicers selected by the U.S. Department of Education do not have the capacity to service the 35.3 million borrowers in the Direct Loan program. Capacity is the reason why Sallie Mae (now Navient), Nelnet, Great Lakes and FedLoan Servicing were originally selected to service loans in the Direct Loan program. Plus, if President Trump is not reelected, the new Secretary of Education is likely to throw out most of the mistakes made by the current administration. The U.S. Department of Transportation is listed as one of the federal agencies that provides loan repayment assistance in the most recent OPM report. She should check whether her job classification qualifies. This may provide some up-front loan forgiveness instead of forcing her to wait another 10 years to have her remaining debt cancelled.

Posted by Suze at 2020-07-03 15:42:51 UTC