The Biden Administration has implemented the Fresh Start program to help borrowers who may have been struggling with their student loans. This program allows borrowers with federal student loans in default to get back on track without facing the consequences of delinquency or credit damage. The program ends on September 30, 2024, giving eligible borrowers time to take advantage of the benefits.
Fresh Start provides automatic benefits to eligible borrowers, including access to federal student aid, stopped collections, eligibility for other government loans, and the ability to rehabilitate loans. Borrowers who use the program also have the opportunity to repay their loans on income-driven repayment plans, access student forgiveness plans, or use federal deferment or forbearance. Signing up for Fresh Start is an easy process that takes 10 minutes or less, and borrowers must do so before September 30, 2024.
There are three ways to sign up for the Fresh Start program: online, by phone, or by mail. Once enrolled, the Department of Education will transfer your defaulted loans to a new loan servicer, remove the default from your credit reports, and place you on the standard 10-year repayment plan. However, enrolling in Fresh Start allows borrowers to move their loans to an income-driven repayment plan within a week of enrollment. Approximately 80% of borrowers who have used Fresh Start have chosen to repay their loans on an income-driven plan.
Enrolling in Fresh Start may result in a $0 monthly payment for some borrowers, especially those with lower incomes who qualify for the new Saving On a Valuable Education (SAVE) plan. The SAVE plan bases student loan payments on 5% of discretionary income, resulting in significant savings for borrowers. Around 50% of Fresh Start borrowers end up paying $0 per month, while 60% pay less than $50 per month. The majority of borrowers using the SAVE plan are saving $1,000 or more per year on student loan payments.
It is essential for borrowers with defaulted student loans to consider enrolling in the Fresh Start program before the September 30, 2024 deadline. Failure to do so could result in financial and credit consequences. By signing up for Fresh Start, borrowers can get their loans out of default, access income-driven repayment plans, and potentially reduce their monthly payments. The program offers a valuable opportunity for borrowers to regain control of their student loan debt and avoid negative repercussions in the future.
