Defaulting your student loans can be a frustrating and overwhelming experience, especially when you’re struggling financially. But there are solutions—like the Fresh Start Program.

The Fresh Start Program is a federal initiative designed to help borrowers who default on their student loans get back on track. Through this program, you may gain benefits that help you get out of the default cycle.

Who Qualifies for the Fresh Start Program?

To qualify for Fresh Start, you must have an eligible defaulted loan, which includes the following loan types:

  • William D. Ford
  • Federal Direct Loan (Direct Loan)
  • Federal Family Education Loan (FFEL)
  • Perkins Loans held by the US Department of Education (ED)

Your loan is considered to be in default if you don’t make your scheduled payments for a period of time—which can vary from 1 to 270 days of nonpayment according to the type of loan.

This means that for some loans, you’re considered in default if you miss the payment due date by any amount of time. However, if you make repayment arrangements soon after your loan has gone into default, you may be able to resolve the situation quickly.

Benefits of Enrolling in Fresh Start

Whether you’ve been dealing with creditors or simply feeling like there’s a dark cloud over your head, know that help is available—and that taking advantage of the Fresh Start program may be one way to start rebuilding relationships with lenders.

Here are some of the benefits of enrolling:

Access to Income-Driven Repayment (IDR) Plans and Loan Forgiveness: Enrolling in Fresh Start allows borrowers to regain access to income-driven repayment (IDR) plans designed to make loan payments more affordable.

Through an IDR plan, your monthly payment could even be $0.

IDR plans may also provide loan forgiveness after a certain period, depending on the number of payments made.

No Collections: When enrolled in Fresh Start, all collection activity, including wage garnishment, tax refund offsets, and collection calls, will stop. This could allow borrowers to get out from under the burden of collections while they work towards getting their loans back on track.

Reporting Changes to Credit Bureaus: In December 2022, the Department of Education began reporting defaulted loans held by the agency as “current” rather than “in collections.” When enrolled in Fresh Start, you could reap this benefit.

And once you’re out of default, the department will remove the record of default from your credit report.

Access to Forbearance or Deferment: When you go into default, you lose access to short-term relief options, including forbearance and deferment. Fresh Start borrowers, however, regain access to forbearance and deferment options once they’ve used the program.

Access to Federal Aid: Fresh Start enrollees also have access to federal aid programs such as Pell Grants and Direct Subsidized Loans, which can help cover tuition costs for college or other educational expenses.

A “Fresh Start” Could Be What You Need

Now that you know the benefits of enrolling, here’s how you can apply for the Fresh Start repayment program:

Determine if Fresh Start is Right for You: Start by looking at your current situation. Consider your monthly budget and how much you can afford to pay toward your student loans.

Check if Your Loan Qualifies: Eligible loans for the Fresh Start program include those mentioned earlier (Direct Loans, FFEL, William D. Ford, Perkins loans held by the US government). Only federal loans are eligible.

Contact Your Loan Servicer or the DOE: Once you have determined eligibility, contact your federal loan servicer to see if you can enroll in Fresh Start. Alternatively, you can call the Department of Education’s Federal Student Aid Information Center to help you with the process.

Investing time into setting up a strategy now can help you stay on top of payments down the road and prevent unnecessary stress. There’s no downside—it’s free to sign up, and the program could help you get back on track. Consider the Fresh Start program to get out of default and bring your loans back into good standing.

Resources:

  • https://studentaid.gov/announcements-events/default-fresh-start
  • https://fsapartners.ed.gov/sites/default/files/2022-08/FreshStartFactSheet.pdf
  • https://studentaid.gov/manage-loans/default
  • https://www.creditkarma.com/news/i/fresh-start-program