The Fresh Start program is a one-time, temporary program introduced by the U.S. Department of Education. The goal is to offer relief for borrowers with defaulted federal student loans after forbearance ends in October 2023. Students who meet certain criteria can sign up for Fresh Start to receive the program’s benefits. This includes restored access to federal student grants and loans, and the ability to get out of default and re-enter payment in good standing.
Here’s what you need to know about the Fresh Start program and how to get access to the benefits.
Who Can Apply For Fresh Start?
The Fresh Start program is available to borrowers who defaulted on their federal student loans before forbearance started on March 13, 2020.
These federal student loans are eligible:
- Defaulted Direct Loans
- Defaulted Perkins Loans held by the Education Department
- Defaulted FFEL Program loans
- Privately held FFELP loans
These loans are not eligible:
- Defaulted Perkins loans held by schools
- Direct Loans that default after the forbearance ends in October 2023
- FFEL Program loans that default after the forbearance ends in October 2023
- Defaulted Health Education Assistance Loan Program loans
- Student loans under the purview of the U.S. Department of Justice for ongoing litigation
- Private student loans
Benefits Of The Fresh Start Program
Borrowers who have federal student loans in default can already access the Fresh Start program. Some benefits are available automatically but other benefits require additional steps such as entering a repayment plan. Only those who enroll in the Fresh Start program by September 2024 will get access to the full benefits of the program. Those who don’t enroll or miss the deadline will forfeit the benefits, regardless of eligibility or other factors.
These are some of the benefits you’ll enjoy on enrollment:
- Your loans will be returned to ‘current’ status on your credit reports.
- Negative default marks on your credit reports will be removed.
- All collection efforts will be suspended even after forbearance ends so your wages will not be garnished and tax refunds won’t be withheld.
- Minimum three years of credit toward income-driven repayment loan forgiveness for the time spend in default during the payment pause.
In addition, you’ll get access to:
- Flexible repayment plans such as income-driven repayment.
- Federal student aid so you can get the funds you need to complete an unfinished degree.
- Other types of government loans including mortgages, that are otherwise difficult to get approval for if you have loans in default.
- Short-term relief including deferment and forbearance.
How To Get Started
Borrowers must compulsorily enroll in the Fresh Start program to get any benefits of the program. The first step to enrolment is to contact your loan lender. You can call 1-800-621-3115 (TTY 1-877-825-9923) to find out who holds your loans if you’re not sure.
Most defaulted loans are held by the Education Department. If your loans are held by the Education Department, you can contact them and submit a Fresh Start request using any one of these three methods:
- Online: Log into your account on myeddebt.ed.gov and sign up on the website. This is the easiest and fastest option if you know your login details.
- By phone: The Default Resolution Group’s phone number is 1-800-621-3115. Before calling, take a minute to look up your income on your most recent federal tax return. You’ll need this information and having it handy will speed up the process. You can call even if you don’t have these details ready but it will take longer. With your income information ready, it shouldn’t take more than ten minutes to complete the formalities.
- By mail: Write a letter addressed to P.O. Box 5609, Greenville, TX 75403. Your letter should state that you would like to use Fresh Start to bring your loans back into good standing. Make sure to include your name, social security number, and date of birth in the mail.
If your loans are held by a guaranty agency, you’ll need to call that agency. The StudentAid website has a list of all the guaranty agencies along with each one’s contact information.
When To Enroll In Fresh Start
You can sign up for the program right away. Enrollments will be accepted for one year after the payment pause ends. The Education Department has said that they would reach out to eligible borrowers notifying them about the program.
However, experts recommend against waiting too long to enroll or waiting to receive notification from the Education Department. They strongly advise borrowers to enroll in the program as early as possible regardless of whether or not they receive any formal letter from the federal government. This is because some borrowers in default may not have updated their email addresses on record. If your updated address is not on record with the Education Department, you could miss the notification if you wait. Or it could happen simply because of some communication lapse.
What Happens After You Enroll In Fresh Start
Three things happen after you enroll in the program and your application is accepted:
- The Education Department will transfer your defaulted loans from the Default Resolution Group or from a guaranty agency to a new non-default loan servicer.
- Your defaulted loans are returned to ‘in repayment’ status.
- The record of your default is deleted from your credit report.
This whole process can take anywhere from four weeks to six weeks.
Your Next Steps
After the default status is removed from your loan, your next step is to choose and enroll in an affordable repayment plan to repay your loans. For most borrowers, an income-driven repayment plan is the best option.
If you choose to enroll in an income-driven repayment (IDR) plan, your monthly payments will be calculated based on your income. There are several IDR plans you can choose from. No matter which one you choose, your monthly payments will never be more than 10% to 20% of your income. This ensures that the repayments will always be affordable. You can use the FSA’s Loan Simulator to estimate your monthly payments and choose the plan that’s best suited for you.
You will need to submit some basic personal and financial information to enroll in an IDR plan. This includes details related to your family size and number of dependents that you support. You also have to provide details of your annual income level and your tax filing status from your most recent federal tax return. If you’re married but file separately, you’ll need to provide information on your spouse’s adjusted gross income.
1 Important Thing To Know About The Fresh Start Program
Fresh Start does not have any effect on your applications for any other types of relief that you qualify for. If you get out of default using Fresh Start, your discharge application will be processed before your loan is transferred to your new servicer. The only exception is if you have a borrower defense application. In this case, the details will be shared with your new servicer.
If you have any federal student loans in default, take time to look into the Fresh Start program today so you can benefit from the relief provisions when loan payments resume in October 2023. For more information, head over to studentaid.gov.