As the U.S. Department of Education pushes for student loan repayment after the payment pause ended, one program in place to assist borrowers in default or delinquent on their federal student loans is the “Fresh Start” initiative. This program allows eligible borrowers to get back on track without being considered delinquent, having their debt sold to collection agencies, or being reported to credit bureaus until September 30, 2024. The Fresh Start program was specifically created to help those struggling with loan repayments to recover now that payments have resumed.
Fresh Start offers numerous benefits to eligible borrowers who sign up for the program. These benefits include renewed access to federal student aid to finish school, stopped collections, eligibility for other government loans, and the restored ability to rehabilitate loans and repay federal student loans on income-driven repayment plans. Signing up for Fresh Start is a quick and easy process that can be completed online, by phone, or by mail, and must be done by September 30, 2024. Once enrolled, borrowers will have their loans transferred to a new loan servicer and put on track to repay their loans.
Enrollment in Fresh Start gives borrowers the opportunity to move their loans from default to “in repayment” status and have the record of default removed from their credit reports. Borrowers might be automatically placed on a standard 10-year repayment plan but have the option to switch to an income-driven repayment plan within a week. The income-driven repayment plans, especially the new Saving On a Valuable Education (SAVE) plan, offer much smaller monthly payments that are based on income and family size, often resulting in borrowers paying $0 or less than $50 per month towards their student loans.
For borrowers in default who are unable or unwilling to start paying on their student loans again, the Fresh Start program offers a pathway to get out of default and onto a payment plan that suits their financial situation. With the SAVE plan offering much lower monthly payments compared to other income-driven plans, borrowers with lower incomes stand to benefit the most. In fact, around half of Fresh Start borrowers end up paying $0 per month on their student loans after enrollment, and 60% pay less than $50. Borrowers on the SAVE plan can save $1,000 or more per year on student loan payments.
If you have federal student loans in default, it is crucial to take advantage of the Fresh Start program before the deadline of September 30, 2024. Enrolling in this initiative can help you get back on track with your student loans, potentially leading to much more affordable monthly payments through income-driven repayment plans. By signing up for Fresh Start and moving your loans out of default, you can avoid financial and credit consequences when the federal on-ramp period for student loans ends. Taking steps now to address your defaulted student loans can lead to significant financial savings and peace of mind in the long run.
