When student loan payments resumed last year, the Biden Administration made a big push to get borrowers back on track with repayment after the payment pause ended late last year.
One of the signature initiatives during this on-ramp period was the “Fresh Start” program to help borrowers who may have been in default on their student loans
This on-ramp period was put in place to ensure borrowers who miss student loan payments have until September 30, 2024 to get back on track without being considered delinquent, being reported to the credit bureaus, or having their debt sold to collection agencies.
And the Fresh Start program was specifically crafted to help those who were in default or delinquent get back on track now that payments have resumed.
What Is Fresh Start?
The “Fresh Start” program for borrowers with federal student loans in default was created to help those who may have been struggling before the pandemic. This program ends on September 30, 2024, so eligible borrowers still have time to take advantage and get back on track with repaying federal student loans.
According to Studentaid.gov, Fresh Start comes with automatic benefits that eligible borrowers can access just by signing up. This includes renewed access to federal student aid so they can finish school, stopped collections, eligibility for other government loans, restored ability to rehabilitate loans, and more.
Borrowers who use the Fresh Start program to get out of default also regain the ability to repay their federal student loans on income-driven repayment plans, access student forgiveness plans or utilize federal deferment or forbearance.
The best part? All you have to do to access these benefits and move your loans out of default is sign up for Fresh Start. After that, you can choose a new repayment plan and get back on track with your student loans.
How To Sign Up For Fresh Start
The U.S. Department of Education says signing up for Fresh Start takes 10 minutes or less, and the following federal student loans are eligible:
- Defaulted William D. Ford Federal Direct Loan (Direct Loan) Program loans
- Defaulted Federal Family Education Loan (FFEL) Program loans
- Defaulted Perkins Loans held by ED
There are three ways to sign up and get started with the program, and you must do so by September 30, 2024. You can:
- Sign up online. Log into your federal student loan account at this site, or create a new account if you don’t have one already.
- Sign up by phone. Call the Dept. of Education at 1-800-621-3115 and request enrollment in this program.
- Enroll by mail. Send a letter requesting access to the program to P.O. Box 5609, Greenville, TX 75403. The letter should include your name, Social Security number (SSN), birthdate, mailing address and the following statement: “I would like to use Fresh Start to bring my loans back into good standing.” Letters must be postmarked before Oct. 1, 2024 for enrollment to apply.
After you enroll in Fresh Start, the Department of Education will transfer your loans in default to a new loan servicer and move them to “in repayment” status. The record of default will also be removed from your credit reports, and you can expect to receive communication about your new student loan payment shortly after that.
The Department of Education says your new loan servicer will automatically place you on the standard, 10-year repayment plan for your federal student loans. However, enrollment in Fresh Start lets you move your loans to an income-driven repayment plan within a week (approximately) after your loans are transferred. According to government data, around 80% of borrowers that have used Fresh Start so far have chosen to repay their loans on an income-driven plan.
Out Of Default And Into $0 Monthly Payment?
While enrolling in Fresh Start to get out of default may not seem like a great idea if you don’t want to start paying on your student loans again, or you simply cannot afford to, having access to income-driven repayment plans gives you a nice workaround that could work out in your favor in a major way.
Income-driven repayment plans base your monthly student loan payment on income and family size, and because the new Saving On a Valuable Education (SAVE) plan requires much smaller monthly payments than other income-driven plans, people with lower incomes who enroll in SAVE stand to benefit the most.
The Department of Education says that, for these reasons, around half of borrowers on the Fresh Start program actually wind up paying $0 per month toward their student loans after enrollment. Further, 60% of Fresh Start borrowers pay less than $50 per month.
Since the new SAVE plan bases student loan payments for undergraduate loans on 5% of discretionary income, even borrowers with higher monthly payments than $0 or $50 still pay less than they would with other income-driven plans. In fact, the Department of Education says the majority of borrowers are saving $1,000 or more per year on student loan payments with SAVE.
At the very least, you should see how much you might pay on the SAVE plan if you used Fresh Start to get out of default so you could qualify. The Loan Simulator at Studentaid.gov is an excellent tool for exactly that, and it’s free and easy to use.
Bottom Line
If you have student loans in default and you are ready to get back on track, the Fresh Start program can help. Just remember that you have to enroll by September 30, 2024, and that it can take a month or more for your enrollment to process so you can move your loans to a new repayment plan.
If your income is low enough, you could even wind up paying $0 or slightly more than that toward your loans each month. However, your loans would still be considered out of default and in good standing despite your low or nonexistent loan payment.
Remember. if you let your loans linger in default and don’t sign up for Fresh Start, you will face financial and credit consequences when the federal on-ramp period for student loans ends on September 30, 2024.
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