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Last week’s blog discussed how the Department of Education is rolling back certain protections for borrowers with defaulted Federal Family Education Loans (FFEL). As a result of the changes, creditors are once again allowed to charge borrowers with defaulted FFEL student loans 16 percent on their balances. Prior rules had let borrowers rehabilitate their loans within 60 days of defaulting to escape these fees.
Before the passage of the Health Care and Education Reconciliation Act of 2010, private lenders made federal loans to students under the FFEL program. The FFEL program ended on July 1st, 2010. No new FFEL loans were made after this date. Borrowers who received federal loans after this date do not have FFEL loans, and are thus not impacted by the new Department of Education changes.
How Can You Find Out Which Type of Student Loans You Have?
The Department of Education operates the National Student Loan Data System (NSLDS). You can use the NSLDS to pull up information on your loans. Simply type in your FSA ID (this was created before you signed for your student loans) and enter your password.
If you have FFEL loans and have defaulted, review last week’s blog on the Department of Education’s loan rehabilitation program. Entering this program may not get rid of the collection agency fees or accumulated interest. However, it could provide you with easier repayment options (such as the IBR) should you complete the requirements of the rehabilitation program.
You can also convert your FFEL loans to Direct loans to avoid possible risks. Converting your FFEL loans to a Direct Consolidated Loan is advantageous in several ways. It allows you access to more favorable income-based repayment programs (like REPAYE). Consolidation also allows you to become eligible for public service loan forgiveness (PSLF).
The Kansas City bankruptcy attorneys at The Sader Law Firm are dedicated to helping people find solutions to difficult financial situations. Reach out to one or attorneys for help if you have student loans in default and want to explore possible options for relief.
