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Loan Consolidation and Loan Forgiveness

seanerin
Established Member

Loan Consolidation and Loan Forgiveness

Hey folks,

I am still considering consolidation of my student loans. All of my loans are FFEL loans serviced through Navient. There is increasing talk about some level of student loan forgiveness (10k or 50k), and I worry that my FFEL loans will not qualify for forgiveness. So, I have a series of potentially unanswerable questions:

 

Does any one know if FFEL loans would qualify for forgiveness?  

In the event of loan forgiveness, can I consolidate to qualify?

Should I just consolidate now to avoid any issues? 

 

Thank you for your time. Take care.

Amex PRG, Amex BCP 24.3K, Citi Diamond Preferred 25K, Chase SP 15K, Banana Republic Visa 10K
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calyx
Super Contributor

Re: Loan Consolidation and Loan Forgiveness

I consolidated my FFEL loans, and assuming you aren't planning or likely to get a mortgage/re-fi in the next year, it might be worth it to you for ease.    It *is* nice not stressing what's going on with forgiveness and whatnot having DirectLoans over FFELs

 

Does any one know if FFEL loans would qualify for forgiveness?
No idea, but, the CARES act only covered loans owned by the gov't, so I think it's reasonable to assume there is a chance that if your FFEL loans are owned by a bank then they would not be covered.    For the banks to agree to forgiveness, the banks would probably want the gov't to cover the funds, and I don't know that they would*.

In the event of loan forgiveness, can I consolidate to qualify?

For CARES, you could.   We won't know the extent or verbiage of the loan forgiveness (if it happens) until it happens.

Should I just consolidate now to avoid any issues? 

This is a personal question.
Pros:  Piece of mind, You qualify for more forgiveness options if you do consolidate into a Direct Loan, You can choose a new servicer if you don't like Navient (only FedLoan allowed for PSLF if you want to try that route).
Cons:   It does remove one way to get out of default, you would take a minor hit to your FICO on the front end for a little bit (this, to me, is only a strong con if you're looking at the aforementioned new/re-fi mortgage).


I usually recommend people not consolidate, but with the way CARES happened and with the potential for forgiveness, I've softened my anti-Consolidation stance.

 

* My opinion - I am not getting into politics/5 things (and I don't think this does - it's just math on my end), but if POTUS goes for the executive order 10k forgiveness, I think it'll just be federal loans.  He has indicated he is not comfortable with an EO for more than 10k, but would overall prefer Congress to take on the issue of forgiveness.  Due to the nature of congress and the divisions of the two parties, I think that if congress goes for forgiveness,  it would be easier/less resistance for forgiveness to cost "less" (so 10k over 50k, a lower earning-cap for forgiveness, etc), and only forgiving federally owned loans would definitely be less expensive than having to pay out privately owned FFEL/Perkins loans - the stats from Dept of Ed  for outstanding loans are:

Direct Loans: $1,242.6 billion (35.1 million borrowers)

Federal Family Education Loans (FFEL): $261.6 billion (12.1 million borrowers)

Perkins Loans: $6.1 billion (2.0 million borrowers)

TOTAL: $1,510.3 billion

 

Not paying out FFEL/Perkins is going to be $~268billion alone and "only" about a quarter of the borrowers.   So the biggest bang for the buck looks like federal loans.

 

^ If that somehow breaks the 5things rules, my sincerest apologies, I'm just trying to be practical/mathmatical about it, these are not my personal opinions on what I think /should/ happen.


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LaHossBoss
Valued Contributor

Re: Loan Consolidation and Loan Forgiveness

@calyx they finally have included FFEL loans as part of the CARES ACT (but only defaulted ones), so it is a small step, but I cannot venture a guess I'd they would be part of any forgiveness. It may be an indication that they will at least be considered for part of the forgiveness, if it happens.

 

Personally, I think FFELs are fairly old, so anyone defaulted and/or still paying on them may have not been in the best financial position to pay them, so of course I feel like they should be included, but only time will tell.




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