The Fresh Start Program offers federal student loan borrowers who are in default a second chance at regaining federal aid benefits. This program allows defaulted borrowers to pull themselves out of the consequences of default, but borrowers must take action to enroll in the program by the impending deadline.
According to StudentAid.gov, more than six million borrowers are eligible for the Fresh Start student loan program. If you’re among the millions of borrowers who could benefit from what this temporary relief program can offer, here’s what to know and how to act on this limited-time opportunity.
Who Qualifies for the Fresh Start Program?
Federal student loan borrowers with qualifying loans are eligible to participate in the one-time Fresh Start program. Students loans that qualify include:
• All defaulted William D. Ford Federal Direct Loans and Family Federal Education Loans (FFEL) that went into default before March 13, 2020.
• Defaulted Perkins loans that are held by the Department of Education.
Defaulted loans that aren’t eligible for Fresh Start include Perkins loans that are held by schools, Health Education Assistance Loan (HEAL) Program loans, and Direct Loans and FFEL Loans that went into default after the COVID-19 payment pause ended. Loans that are pending litigation under the Department of Justice are also not eligible for the Fresh Start Program.
Do Private Student Loans Qualify?
Since the Fresh Start student loan program is a federal initiative, it’s only accessible to borrowers who’ve defaulted on the qualifying federal student loans mentioned above. If you have a private student loan that’s in default, it is ineligible for this government program.
It’s important to speak to your lender as soon as possible if you can’t make your loan payment. Lenders might send a defaulted private student loan to collections to get payment, and report the default to credit bureaus which harms your credit history and score.
Benefits Available Through the Fresh Start Program
If your defaulted federal student loans qualify for the Fresh Start initiative, enrolling in the program can unlock crucial benefits that are typically inaccessible with a defaulted loan status. Here’s how the Fresh Start program for student loans can help you:
• Re-access federal student loans and grants. By lifting your loan out of default through the Fresh Start program, you’ll regain eligibility for federal student loans and grants.
• Enroll in an income-driven repayment (IDR) plan. Fresh Starts lets you enroll in an IDR which you weren’t eligible for with a defaulted loan. This includes the newest Saving on a Valuable Education (SAVE) Plan which, according to the Department of Education, lowered monthly payments for 50% of SAVE Plan participants to $0.
• Requalifies you for loan forgiveness. Loans in default don’t qualify for loan forgiveness, so Fresh Start can help you regain student loan forgiveness eligibility for that debt.
• Erases the default from your credit history. Fresh Start changes the loan’s status from “default” to “current” on your credit report. This essential change not only has a positive impact on your finances, like qualifying for lower rates on new credit accounts, but also in your everyday life, like for a rental application.
• Dodges wage garnishment actions. Some borrowers with defaulted federal loans might have up to 15% of their wages garnished as a way for the government to collect the unpaid debt. Under Fresh Start, the wage garnishment practice for qualifying defaulted loans is avoided.
• Avoids withholding other federal benefit payments. Benefit payments from federal sources, like Social Security and tax refunds, can be automatically withheld and applied to the defaulted loan balance. By getting your loan out of default through Fresh Start, you can avoid this outcome.
Applying for the Fresh Start Program
The student loan Fresh Start application is straightforward, and enrollment only takes a few minutes. For defaulted federal student loans that are held by a guaranty agency, you must contact the agency that holds your loans to enroll in Fresh Start. If you’re unsure which agency oversees your defaulted loan, call the Debt Resolution Group at 1 (800) 621-3115.
For defaulted loans that are held by the Department of Education, there are three ways to enroll:
• Online. Create a myeddebt.ed.gov account if you don’t already have one; otherwise, log into your myeddebt.ed.gov account. Under the Account Information page, find the Fresh Start Transfer Information section and click on the link to “enroll.”
• Phone. Call 1 (800) 621-3115 to speak to a representative with the Debt Resolution Group. When you’re asked for the reason for your call, say that you’d like to “get out of default through Fresh Start” or similar wording. You can also express your interest in enrolling in an IDR plan while making this phone call.
• Mail. Mail a request letter with your name, Social Security number, date of birth, mailing address, and the following language: “I would like to use Fresh Start to bring my loans back into good standing.” All letters must be postmarked before October 1, 2024 and mailed to: PO Box 5609, Greenville, TX 75403.
Does the Fresh Start Program Have a Deadline?
Generally, the main Fresh Start eligibility criteria is ensuring the federal loan that’s in default qualifies for the program. A vital part of participating in the program is requesting enrollment into Fresh Start by the September 30, 2024 deadline.
After this date, the program is closed to enrollment, and currently, there are no announced plans to extend the deadline. Don’t miss out on this one-time opportunity to get your federal student loans back into good standing.
Next Steps After the Fresh Start Program
When your loan is successfully out of the default standing, it’s assigned to a new loan servicer. The loan’s status will show on your account as “in repayment,” and the Department of Education will request the removal of the loan’s default record from your credit report.
Your new loan servicer will contact you once your loan is successfully transferred. Shortly afterward — typically within a week — you can then apply for an income-driven repayment plan to help make your payments more manageable.
The Takeaway
Fresh Start offers easy and fast relief from federal student loan default. If you have qualifying Direct or FFEL Program loans, this temporary program not only helps you get a defaulted federal loan back into good standing and re-access certain federal programs, it can improve other areas of your life and finances by removing the adverse default status from your credit record.
But with the upcoming September 30, 2024 deadline to enroll, you must act quickly to recover the benefits you lost as a result of default.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
FAQ
What is the deadline for the Fresh Start program?
Enrollment into the Fresh Start Program ends on September 30, 2024. Currently, the program will be inaccessible to student loan borrowers with defaulted loans after this date. Keep in mind that defaulted loans aren’t automatically enrolled in Fresh Start. If you have a qualifying student loan that’s in default, you must take action to request enrollment into the program.
Where can I find more information about the Fresh Start program?
Visit StudentAid.gov for more information and resources about the Fresh Start program. You can also contact your loan servicer to speak to a representative about your eligibility and enrollment into the initiative.
Can I still participate if I have multiple student loans?
Yes, if you have other federal student loans that are not in default, you can still participate in the Fresh Start student loan program for your qualifying defaulted student loans.
Photo credit: iStock/GaudiLab
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