Prior to July 1, 2010, federal student loans were not funded by the department of education and the federal government. Under the Federal Family Education Loan Program (“FFEL”), private lenders used their own funds to make federal student loans to borrowers to pay for secondary education (college). These Loans were guaranteed by “guaranty agencies” that insured the funds, which were, in turn, reinsured by the federal government.
The FFEL loan program was discontinued as of July 1, 2010 by enactment of the Health Care and Education Reconciliation Act of 2010. No new FFEL loans have been made since July 1, 2010.
The largest originator of FFEL loans was Sallie Mae (now called Navient). FFEL loans are serviced by the guarantors, nonprofit companies that provide support for the administration of the FFEL Loans. The most well know of these guarantors:
- Educational Credit Management Corporation (“ECMC”),
- Higher Education Loan Authority of the State of Missouri (commonly referred to as “MOHELA”); and
- Great Lakes Educational Loan Services, Inc. (“Great Lakes”); and
- Nelnet Diversified Solutions, LLC.
Because FFEL loans are federal loans, all the benefits of federal loans like income driven repayment and loan forgiveness are available to FFEL borrowers.
Like most other private bank loans, FFEL student loans are sold from the originator to other institutions. It is not uncommon for FFEL student loans to have been sold multiple times over the years. While borrowers are notified of the sale of the loan, the process can be confusing, and it is not unreasonable for a borrower to be unsure who really owns their FFEL student loan.