What are ED Held Loans?
ED held loans, also known as Federal Family Education Loans (FFELs), are a type of student loan that was offered by the U.S. Department of Education through private lenders. These loans were designed to help students finance their education by providing them with the necessary funds to cover tuition, fees, and other related expenses. However, with the introduction of the Direct Loan Program in 2010, ED held loans have become less common, and many borrowers are now seeking ways to manage and pay off their FFELs. In this article, we will explore what ED held loans are, how they differ from other types of student loans, and the options available for borrowers looking to manage their ED held loans.
Understanding ED Held Loans
ED held loans are a part of the FFEL program, which was established in 1965 to provide financial assistance to students who might not otherwise be able to afford higher education. Under this program, the federal government would guarantee loans made by private lenders to eligible students. The loans were then purchased by the Department of Education, which became the holder of the loans.
ED held loans can be categorized into two types: subsidized and unsubsidized. Subsidized loans are available to students who demonstrate financial need, and the government pays the interest on these loans while the student is enrolled in school at least half-time. Unsubsidized loans, on the other hand, are available to all students, regardless of their financial need, and the interest on these loans accrues from the time the loan is disbursed.
Differences from Other Student Loans
While ED held loans are a type of federal student loan, they differ from other federal loans, such as Direct Loans, in several ways. Direct Loans are originated and serviced by the U.S. Department of Education, whereas ED held loans were originated by private lenders and then purchased by the Department. This distinction can affect the repayment options and terms available to borrowers.
Another key difference is that ED held loans may have different interest rates and fees compared to Direct Loans. Interest rates on ED held loans were determined by the market rate at the time the loan was originated, while Direct Loans have fixed interest rates set by Congress.
Options for Managing ED Held Loans
Despite the changes in the student loan landscape, borrowers with ED held loans still have several options for managing their debt. Here are some of the most common strategies:
1. Consolidating ED held loans: Borrowers can consolidate their ED held loans into a Direct Consolidation Loan, which may offer lower interest rates and more flexible repayment plans.
2. Refinancing ED held loans: Borrowers may be able to refinance their ED held loans with a private lender, potentially securing lower interest rates and better repayment terms.
3. Income-driven repayment plans: Borrowers with ED held loans may qualify for income-driven repayment plans, which base the monthly payment on the borrower’s income and family size.
4. Loan forgiveness programs: Certain borrowers may be eligible for loan forgiveness programs, which can cancel a portion or all of their student loan debt after meeting specific criteria.
Conclusion
ED held loans, once a common form of student loan, have been largely replaced by the Direct Loan Program. However, borrowers with ED held loans still have options for managing their debt, including consolidation, refinancing, and exploring income-driven repayment plans. As the student loan landscape continues to evolve, it’s essential for borrowers to stay informed about their loan options and take proactive steps to manage their debt effectively.
