For similar reasons, the Public Service Loan Forgiveness program, which began in 2007, also excluded those FFEL borrowers. They often didn’t know that, though, and when they called for help, customer service agents often gave them incorrect information about their eligibility. The Education Department is now trying to rectify that problem, albeit too late for untold numbers of borrowers.
During the pandemic, the FFEL borrowers were at a further disadvantage. While most federal student loan borrowers have been able to pause their payments since March 2020, those FFEL borrowers could not.
On Sept. 29, these same borrowers were disappointed again.
Here’s why: When I asked the Education Department in August about FFEL borrowers’ eligibility for the cancellation of up to $20,000 that it had offered to millions of other borrowers, a senior official said the FFEL borrowers could “sit tight” if they wanted to, rather than moving their debt into the Direct Loan program through a process known as consolidation.
(Consolidation would have offered instant eligibility for the cancellation, and lots of people took advantage of that. But for a variety of reasons — different interest rates, suspicion that any transfer would go off the rails — some people found it advantageous to keep their FFEL loans where they were, while awaiting further instructions.)
The official made it clear that the Education Department was not making a recommendation either way about whether to consolidate. That was because the department said it intended to make it possible for all FFEL borrowers to get relief, even if they did not consolidate their loans.
I wasn’t the only one to get this message. Multiple borrowers told me that their loan servicers had told them the same thing. Betsy Mayotte, a decades-long student loan industry veteran who runs the Institute of Student Loan Advisors, had been passing along the same “you can wait” advice.
Then, on the morning of Sept. 29, everything changed. The Education Department’s revised F.A.Q. webpage suddenly said only FFEL borrowers who had, in fact, applied to consolidate before that date were eligible for the new debt cancellation.
