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If You Defaulted on Your Student Loans, You May Qualify for This Debt Relief Program

The Fresh Start Program can help you get your loans out of default and into student loan forgiveness programs.

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Before the pandemic-related payment pause that started in March 2020, more than 8 million federal loan borrowers had defaulted on their student loans.

If you’re loan are in default, meaning your payment was late by more than 270 days, your loans are often no longer eligible for forgiveness programs. But there’s a new program that can help you get your loans back in good standing and potentially qualify for debt relief.

The Fresh Start program is a one-time offering from the Department of Education that lets you move your student loans out of default status, while offering many other benefits. But there’s a deadline: You’ll have to apply by Sept. 30, 2024, to get your student loans out of default with Fresh Start. 

Read more: Another 277,000 Borrowers Received Student Loan Forgiveness Last Week. Here’s How You Can, Too

What is the Fresh Start Program?

“The Fresh Start Initiative is the best opportunity for getting student loans out of default.”

The Fresh Start program is a temporary, one-off program from the Department of Education that can help you get your student loans out of default. Your loans are considered in default status if you missed more than 270 days of payments on them. Fresh Start has an easy sign-up process and can return your loans to active repayment status within four to six weeks.

Normally, borrowers have two options for getting loans out of default: student loan consolidation and rehabilitation, both of which can take several months. Fresh Start is temporarily replacing rehabilitation -- and its offers several additional benefits. 

“The Fresh Start Initiative is the best opportunity for getting student loans out of default,” said financial aid expert and CNET Money Expert Reviewer Mark Kantrowitz. 

Current benefits for borrowers with defaulted federal student loans

Between now and the end of September, all borrowers automatically get the following perks: 

  • Collections pause: The Department of Education stopped collections activities on defaulted loans starting in March 2020. You won’t get collections calls or be subject to wage, tax refund or Social Security garnishment. If your loans are moved out of default, you won’t have to worry about collections activities as long as you keep up with your monthly payment.
  • Credit reporting changes: The government will also report your loans as current to the credit bureaus, so you won’t see your accounts in collections on your credit report. 
  • Access to financial aid and government-backed loans: You may be able to qualify for federal student aid again, such as grants, work-study and student loans. You may also be able to access other types of government-backed loans, such as FHA mortgages

After you apply for Fresh Start, you’ll also get these additional benefits: 

  • Return to good standing: Your loans will be taken out of default and go back to “in repayment status.” They’ll also be transferred from the Default Resolution Group to a new loan servicer. 
  • Credit history update: By using Fresh Start, you can get the record of default removed from your credit history. 
  • Access to federal plans and protections: You’ll be able to choose any federal repayment plan, such as the standard 10-year plan, the graduated plan or an income-driven repayment plan. You’ll also have access to deferment and forbearance if you need to postpone payments in the future. 
  • Renewed eligibility for loan forgiveness: Your restored federal loans will also be eligible for federal forgiveness programs, such as Public Service Loan Forgiveness, Teacher Loan Forgiveness or the Saving on a Valuable Education program.

Your loans will automatically go onto the standard 10-year repayment plan after they come out of default. But you can request an income-driven plan on the Federal Student Aid website.

Can Fresh Start help me get student loan forgiveness?

Yes. A major benefit of Fresh Start is that it restores your access to student loan forgiveness programs, such as Public Service Loan Forgiveness and Teacher Loan Forgiveness. Each program has its own specific eligibility requirements, such as working in public service for a certain number of years and paying your loans back on a qualifying repayment plan. 

You can also qualify to have your remaining balance forgiven if you qualify for an income-driven repayment plan. The SAVE plan, for example, will offer loan forgiveness after 10 to 25 years, depending on your original loan balance and type of loan. The other IDR plans will forgive any remaining balance after 20 or 25 years of payments. 

There’s more good news for borrowers who use Fresh Start -- their payment counts won’t restart at zero, so you may be well on their way to receiving forgiveness through a program or IDR plan. 

“[Borrowers] will receive credit for months in default … from March 2020 to the date they were no longer in default due to the Fresh Start initiative,” Kantrowitz said. “They also get credit for qualifying payments made prior to going into default.” 

Even if you don’t qualify for forgiveness programs, enrolling in an IDR can help lower your monthly student loan bill. According to the Department of Education, 80% of Fresh Start borrowers move to an income-driven repayment plan. About half of Fresh Start borrowers qualify for $0 monthly payments on an IDR plan, while 60% pay less than $50 per month toward their student loans. 

How can I tell if my loans are in default?

Since student loan payments were paused for over three years, you might not be sure if your loans are in default. There are a few ways you can check on the status of your loans: 

  • Contact your loan servicer: Your loan servicer manages your student loans and can inform you about their status. You can find your loan servicer by signing into your Federal Student Aid account at StudentAid.gov with your FSA ID, which is your unique username and password. Alternatively, you can call the Federal Student Aid Information Center at 1-800-433-3243.
  • Log into your Federal Student Aid account: You can also find your loan status within your Federal Student Aid account. Within the dashboard, you should see a list of your federal student loans, including their balances, interest rates and repayment status. 
  • Review your credit report: Another option is reviewing your credit report, which will list any student loans that are in default. You can get a free copy of your credit report weekly at AnnualCreditReport.com. However, contacting your loan servicer or logging into your Federal Student Aid account is probably your best bet, as your credit report may not have the most up-to-date information. 

Do all loans qualify for the Fresh Start Program?

Any federal student loan borrower can qualify for Fresh Start, but not all loan types are eligible. These loans are all eligible for Fresh Start: 

  • Direct loans, such as Direct subsidized loans, Direct unsubsidized loans and Direct PLUS loans
  • Federal Family Education Loans 
  • Perkins loans held by the Department of Education 

However, the following types of loans aren’t eligible for Fresh Start: 

  • Perkins loans held by schools 
  • Loans from the Health Education Assistance Loan Program 
  • Loans that are part of ongoing litigation with the US Department of Justice 
  • Direct or FFEL Program loans that go into default after the end of the COVID-19 payment pause 

If you have a federal student loan that doesn’t qualify for the Fresh Start program, you can choose loan consolidation to replace your non-eligible loans with a new Direct Loan. This will get your loans out of default if you agree to get on an income-driven repayment plan. 

You should consolidate quickly, though -- while you can technically consolidate at any time, right now, you’ll be able to maximize your forgiveness options if you consolidate before the end of June.

Note: Consolidating your loans will move them out of default status, but it will not remove the record of default from your credit report.

How to sign up for the Fresh Start program

There are three ways you can sign up for Fresh Start:

  1. Online: You can sign up for Fresh Start online by logging into your account at myeddebt.ed.gov. This is likely the easiest option if you know your login. 
  2. Over the phone: Call the Department of Education’s Default Resolution Group at 1-800-621-3115 (the TTY number is 1-877-825-9923). This call will take about 10 minutes. 
  3. By mail: Send a letter to P.O. Box 5609, Greenville, TX 75403. Along with your request to enroll in Fresh Start, write down your name, mailing address, date of birth and Social Security number. Your letter has to be postmarked before Oct. 1, 2024. 

What happens if I miss the Fresh Start deadline?

If you miss the deadline to sign up for Fresh Start, you can still consolidate federal loans to get them out of default. But your payment count may restart at zero, which means you’ll need to make payments for another 10 to 25 years if you’re working toward forgiveness. 

Your other option, loan rehabilitation, will remove the default from your credit report, but it takes a lot longer. You’ll have to make nine full payments over the course of 10 months to get your loans out of default. You can use rehabilitation only once (though having previously used Fresh Start won’t count against this one-time chance). You can learn more about loan rehabilitation at StudentAid.gov.

Rebecca Safier is a personal finance writer and certified student loan counselor who specializes in student debt, personal loans, and budgeting. Previously a senior writer for LendingTree and Student Loan Hero, Rebecca's work has been published in NextAdvisor with TIME, U.S. News & World Report, Forbes Advisor, MarketWatch, and other publications. She has also contributed expert commentary to Fortune, Entrepreneur, NBC, and more. When she's not writing about all things personal finance, Rebecca is teaching people how to blog on her website Remote Bliss, traveling to new places, or taking her Boston terrier to the beach.
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