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Fresh Start Offers Simplified Path Out of Federal Student Loan Default

To help ease defaulted student loan borrowers back into repayment, the Department of Education has created the Fresh Start program.

Written By: Michael P. Lux, Esq.


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Defaulting on federal student loans can be a frightening experience. The repercussions, such as persistent collection calls, wage garnishments, and tax withholding, can have serious consequences.

While the payment pause provided relief for borrowers with defaulted student loans, it is important to note that this temporary reprieve is concluding soon.

However, there is good news: the Fresh Start program offers a long-term solution by pulling the loans out of default and providing affordable payments. According to the Department of Education, around half of Fresh Start participants qualify for monthly payments as low as $0.

What is Fresh Start?

Fresh Start is a one-time, temporary program from the U.S. Department of Education (ED) that provides support to borrowers with defaulted federal student loans. By using Fresh Start, you can take advantage of various benefits to restore your financial well-being.

Automatic Benefits of Fresh Start

Eligible borrowers automatically receive many of the benefits of Fresh Start without enrollment.

These benefits include:

  1. Restored Access to Federal Student Aid: Because of Fresh Start, borrowers regain eligibility for federal student aid, including loans and grants. This opens up opportunities to pursue further education and potentially enhance your ability to repay your loans.
  2. Halted Collections: The collections relief you received during the COVID-19 payment pause continues under Fresh Start. This means your tax refunds, wages, and Social Security payments will not be withheld, and no collection calls will be made.
  3. Eligibility for Other Government Loans: Fresh Start removes your default status from the government credit reporting system (CAIVRS). This enhances your eligibility for certain government-backed loans, such as mortgages.
  4. Ability to Rehabilitate Loans Multiple Times: Unlike the usual limitation of rehabilitating loans only once, Fresh Start provides a new remedy. Even if you’ve already rehabilitated your loans before, Fresh Start provides you with another chance to get your loans back on track.
  5. Improved Credit Reporting: Starting from December 2022, defaulted loans held by ED are reported as “current” rather than “in collections” to credit reporting agencies. Guaranty agency-held loans also received this benefit starting in February 2023.

Unfortunately, the automatic benefits end one year after the conclusion of the payment pause.

However, borrowers who enroll in the Fresh Start program can lock in these benefits long-term.

Benefits of Enrolling in Fresh Start

In addition to securing the automatic benefits indefinitely, the borrowers who enroll in Fresh Start receive additional perks.

These additional benefits include:

  1. Access to Income-Driven Repayment (IDR) Plans: Fresh Start participants can enroll in income-driven repayment plans, where monthly payments are based on income and family size. This ensures that your payments are affordable, with some borrowers paying as little as $0 per month.
  2. Eligibility for Student Loan Forgiveness Programs: Defaulted loans are not eligible for loan forgiveness programs. However, by utilizing Fresh Start and exiting default, you regain eligibility for forgiveness programs like Public Service Loan Forgiveness.
  3. Access to Short-term Relief (Forbearance and Deferment): Once you’re out of default, Fresh Start allows you to request short-term relief options such as forbearance and deferment. These can provide temporary financial relief during challenging times.

How to Enroll in Fresh Start

To take advantage of Fresh Start and get out of default, borrowers need to contact their loan holder, whether it’s ED or a guaranty agency. If you’re unsure who holds your loans, call the Department of Education at 1-800-621-3115 for assistance.

Borrowers with loans held by the Department of Education have three ways to enroll in Fresh Start:

  • Online: Log in to your account at myeddebt.ed.gov and initiate the Fresh Start process. According to the Department of Education, the online option is the easiest enrollment method.
  • Phone: Call 1-800-621-3115 (TTY 1-877-825-9923) to speak with a representative and request Fresh Start. The Department of Education estimates that this call will take about 10 minutes.
  • Mail: Write to P.O. Box 5609, Greenville, TX 75403. In your letter, the Department of Education asks that you include your name, social security number, date of birth, and the following: “I would like to use Fresh Start to bring my loans back into good standing.”

What Happens After Enrollment?

Borrowers that sign up for Fresh Start will see the following happen:

  • Your loans get transferred from the Default Resolution Group to a new servicer.
  • The defaulted loans get changed to “in repayment” status.
  • The record of your default is removed from your credit report.

The Department of Education estimates that the entire process will take 4-6 weeks.

Additionally, borrowers enrolled in Fresh Start may also want to verify that they have signed up for the best Income-Driven Repayment Plan for their circumstances.

Student Loans Eligible for Fresh Start

Unfortunately, not all student loans are eligible for the Fresh Start program.

Notably, private loans cannot benefit from Fresh Start. The program is only available to borrowers with federal student loans.

The following federal student loans are eligible for Fresh Start:

  • Defaulted William D. Ford Federal Direct Loan (Direct Loan) Program loans
  • Defaulted Federal Family Education Loan (FFEL) Program loans
  • Defaulted Perkins Loans held by ED

The following loans are not eligible for Fresh Start:

  • Defaulted Perkins Loans held by schools
  • Defaulted Health Education Assistance Loan Program loans
  • Student loans remaining with the U.S. Department of Justice for ongoing litigation
  • Direct Loans that default after the end of the COVID-19 student loan payment pause
  • FFEL Program loans that default after the end of the COVID-19 student loan payment pause

Additionally, FFEL loans that defaulted during the COVID-19 payment pause are not eligible for Fresh Start. However, they will be taken out of default as part of the expanded COVID-19 relief.

Confused about Eligibility? If you are not sure whether or not your loans are eligible for Fresh Start, the easiest way to verify eligibility is to call the Department of Education Default Resolution Group at 1-800-621-3115.

Final Thoughts

Defaulted federal student loans can feel overwhelming, but Fresh Start offers a lifeline for borrowers seeking a way out.

By taking advantage of this program, you can restore access to federal student aid, improve your credit standing, and establish an affordable repayment plan.

The window to apply for Fresh Start ends August 30th, 2024. This deadline might seem far away, but missing it would be a devastating mistake.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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