‘Shady’: One woman feels misled after federal student loan consolidation

It takes some people decades to pay off their student loans. One woman’s last payment was in sight until she took a gamble she said she was told to take.

In the early 2000s, Laurie Winter packed up her car and drove herself to Tallahassee to start at Florida State University.

“I applied for the student loans on my own,” Winter recounted. “I also got some Pell Grants. And, you know, I was the first person to go to college in my family so I kind of just went out and did it on my own.”

She took out Federal Family Education Program loans or FFEL loans. Most FFEL loans are held by private lenders, not the federal government. They no longer exist but without them and grants, Winter wouldn’t have been able to graduate in 2005 with a degree in Fashion Merchandising.

When I graduated, and I went a couple summers too, I had $45,000 in student loans. Laurie Winter

A year later, Winter consolidated her FFEL loans into one. Like many federal student loan borrowers, she took advantage of the COVID-19 student loan payment pause. When the Biden Administration announced borrowers could have up to $20,000 of their student loan debt wiped back in 2022, she thought her last payment was within reach. Yet, she kept getting emails from her servicer and the US Department of Education that she would need to apply for a Direct Consolidation Loan in order to be eligible.

“For me it was a no brainer,” Winter thought.

And a few months later, she learned her monthly $250 payment dropped to $150 but it’s going to take even longer to pay her loans back and she’s paying more interest.

“That’s not at all what I was under the assumption that was happening. I don’t know why I would want to refinance my loan for less money and to add interest on when I’ve paid off all the interest,” Winter said.

After the Supreme Court struck down the Biden Administration’s loan forgiveness plan in June 2023, Winter felt even more wronged.

“I only had about two years left and this extends it out,” Winter said in frustration. “I never would have gone through this process if I’d known that this was going to be the outcome.”

WINK News Consumer Reporter Andryanna Sheppard reached out to the US Department of Education to figure out what happened. Spokespeople said since Winter’s FFEL loans were technically held by a private company and not the federal government, she was not eligible for any federal forgiveness plans. She had to get that federally held Direct Consolidation Loan in order to potentially have her loans wiped. The Direct Consolidation Loan also gives her access to some income-driven repayment (IDR) plans.

“I think it’s real convenient that all of us had to refinance our loans with the Department of Education,” Winter said with skepticism. “It makes sense if that’s where the funds were coming from but now we did all of that and there’s no funds coming from them. It just seems like everyone had to refinance their loan with the government which seems shady.”

Now Winter is eligible for the new federal student loan debt relief plan President Biden announced in early April.

“Starting this fall, we plan to deliver up to $20,000 in interest relief to over 20 million borrowers and full forgiveness for millions more,” he said during his announcement.

That applies to those who owe more than their original loan was worth. The plan would also wipe away debt for people who have been paying undergrad loans for 20 years or more or grad student loans over the last 25 years. It also applies to those already eligible for loan forgiveness and for borrowers who can prove financial hardships prevent them from repaying their loans. But like the Biden Administration’s first attempt at student loan forgiveness, this plan is already dealing with legal challenges.

Winter has some regrets about consolidating. She originally only had about $15,000 left to pay back. Now her account shows she’ll have to pay close to $22,000 to be free of student debt.

“I had no reason other than the hopes and listening to the emails that I got and the things that I saw on TV that my loan would be forgiven. Otherwise, I would have just continued paying once the pause was up at the amount that I was paying previously.”

If you’re one of the millions of people with FFEL loans held by private companies, you have until April 30 to apply for a Direct Consolidation Loan and reap the benefits of any debt relief plans.