FFELP Student Loans are education loans that were provided via the Federal Family Education Loan Program that recently came to a close with the enactment of the Student Aid and Fiscal Responsibility Act, or SAFRA. The FFEL Program had been in existence since 1965, and had been a favorite of colleges, and other postsecondary institutions from across the nation for over forty years.
The FFEL Program essentially gave students the ability to get certain kinds of federal student loans from private lenders by guaranteeing, or insuring the private lenders against student defaults. This gave these lenders enough confidence to provide such need-based loans without the same kind of credit restrictions that were in place for the majority of private student loans.
FFELP, SAFRA, and the Direct Loan Program
Previous to 2010 when the SAFRA legislation became law students were able to get their federal student loans from either private lenders via the FFEL Program, or directly from the Department of Education via the Direct Loan Program. Most federal student loans were in-fact provided via the FFEL Program, and students were allowed to shop around amongst private lenders in order to get the best deal.
With the inception of SAFRA this all changed, as the bill abolished the FFELP all together, and made all federal education loans a part of the Direct Loan Program. Supporters of the bill argued that eliminating the FFEL Program would save both students, and the taxpayers money by cutting out the “middle-man”, and it remains to be seen whether or not this will actually be the case.
The Direct Loan Program offers essentially the same types of federal student loans that were previously offered via the FFEL Program, and includes the Subsidized Stafford Loan, the Unsubsidized Stafford Loan, and certain kinds of PLUS Loans. Students can apply for these loans via the FAFSA, with the money now coming straight from the federal government via the Department of Education.
Old FFELP Loans
If you still have an FFELP loan you shouldn’t worry, as you don’t have to do anything extra in order to keep, maintain, or payback your loan. You will still have to repay your loan just as if the FFEL Program was still in place, and the primary difference going forward will revolve around how students get their future federal student loans.
The main thing I’m advising students on with regard to the loss of the FFEL Program is in regard to the availability of private student loans, and how they should perceive what various private lenders may be offering them in terms of a student loan. Before when FFELP was in place, a private lender could make the argument that you could get a student loans without a cosigner, or with bad credit, because the loans they were offering as part of FFELP were in-fact need-based, and not based on credit.
Now ALL student loans that are being offered via private lenders are in-fact private student loans, and are most of the time totally based on credit.
This essentially means that if you see ANY lender advertising, or offering what they consider to be a student loan that it must be a private student loan if it is in reality an education loan. This means that you will have to have the appropriate credentials in place in terms of credit and income to get approved, or have a credit-worthy cosigner to get an approval from now on, bottom-line.
