Fresh Start Program: Get Out of Default Without Risking Your Assets

• The Fresh Start Program offers a one-time opportunity to remove your defaulted federal student loans from default, stop collections, and restore your eligibility for student loan repayment options, including income-driven repayment and loan forgiveness programs.

• By enrolling in Fresh Start, you can stop wage garnishments and tax refund seizures, while improving your credit score. Fresh Start ensures your student loan debt won’t continue to harm your credit report or financial opportunities.

• This is a temporary program, and the chance to enroll ends soon. Missing the deadline means losing access to crucial benefits like protection from collections, restored eligibility for federal financial aid, and student loan forgiveness programs.

By enrolling in the program, your loans are removed from default, collections stop, and you can work toward an affordable repayment plan. This prevents wage garnishments, tax refund seizures, and other aggressive collection tactics.

Whether you’re concerned about Social Security, tax refunds, or your home, the Fresh Start Program ensures these assets are safeguarded while you get back on track with manageable payments.

For many borrowers, the fear of re-engaging with the system is real, but Fresh Start is designed to offer peace of mind by eliminating the most immediate risks.

Related: How to Get Student Loans Out of Default Fast

The Fresh Start Program allows borrowers in default to bring their federal student loans back into good standing, stop collections, and avoid wage garnishments or tax refund seizures. The program is available until September 30, 2024, so act now to take advantage of this opportunity.

Step 1: Check Your Eligibility: To be eligible for the Fresh Start Program, your loans must currently be in default. You can check your status by logging into your account on myeddebt.ed.gov. If you’re eligible, your defaulted loans will be marked as qualifying for Fresh Start. Related: MyEDDebt.ed.gov: How to Access and Resolve Defaulted Student Loans

Step 2: Enroll in the Program: Once you’ve confirmed your eligibility, you can enroll in the Fresh Start Program by contacting the Default Resolution Group at 1-800-621-3115 or visiting the Fresh Start page on the Federal Student Aid website. After enrollment, your loans will be immediately removed from default status, and collections on those loans will stop.

Step 3: Choose a Repayment Plan: After your loans are no longer in default, you’ll need to choose a repayment plan. One of the best options for many borrowers is an Income-Driven Repayment (IDR) plan, which can offer payments as low as $0 if you’re unemployed or have low income. You can apply for an IDR plan through your loan servicer or on the Federal Student Aid website.

One of the biggest concerns student loan borrowers have about the Fresh Start Program is how it will impact their credit score. The good news is that enrolling in Fresh Start can actually improve your credit over time, especially if your loans have been in default for an extended period.

If you’d like more detailed information, check out the full Fresh Start Fact Sheet from the US Department of Education.

Here’s what you can expect when it comes to your credit:

• Loans Removed from Default: Your loans will be reported to credit bureaus as current, which helps rebuild your credit standing.

• Removal of Long-Term Delinquencies: Loans that have been delinquent for more than seven years may be completely removed from your credit report.

• Exemption from CAIVRS: You’ll be removed from the federal Credit Alert Verification Reporting System (CAIVRS), making it easier to qualify for housing, employment, and other financial products.

• No More Collections: Fresh Start prevents wage garnishments, tax refund seizures, and other aggressive collection efforts, allowing your credit to recover.

Staying in default will continue to harm your credit in the long run through wage garnishments, tax refund seizures, and potentially adding collections to your credit report. By bringing your loans back into good standing through Fresh Start, you’re preventing these negative consequences and giving your credit the chance to recover.

For many borrowers, the fear of unaffordable payments is very real, especially if past experiences with loan servicers left them feeling frustrated and unsupported. The good news is that after enrolling in Fresh Start, there are multiple repayment options available, and it’s possible to find a plan that works for your financial situation.

Currently, the SAVE (Saving on a Valuable Education) Plan, which replaced the REPAYE plan, is blocked due to legal challenges. This means that borrowers who had enrolled in SAVE are temporarily placed into forbearance, during which:

• You don’t have to make any payments.

• Interest does not accrue on your loans.

• But this time won’t count toward forgiveness under PSLF or IDR forgiveness.

While the Biden-Harris Administration is defending the SAVE plan in court, you can still apply for other IDR plans, such as the Income-Based Repayment (IBR) plan. IDR plans base your monthly payments on your income, family size, and financial situation, which can lead to affordable payments as low as $0 per month for some borrowers.

Note: Due to the ongoing legal situation, the processing of new IDR applications may be delayed, and the online IDR application on studentaid.gov is temporarily unavailable. But you can still apply for an IDR plan by submitting a PDF application directly to your loan servicer. Keep checking the Department of Education’s website for updates.

If you don’t enroll in the Fresh Start Program by the deadline of September 30, 2024, there are several significant consequences that could impact your financial situation. While it’s understandable to feel uncertain about re-engaging with your loans, missing this opportunity could lead to more severe challenges down the road.

• Resumption of Collection Activities: The Department of Education will resume collection efforts on your defaulted loans. This means you could face wage garnishments, where a portion of your paycheck is automatically deducted, or have your income tax refunds withheld to repay your loans.

• Negative Credit Reporting: Your default status will remain on your credit report, which can significantly hurt your credit score. This may affect your ability to get loans, credit cards, housing, or even certain jobs.

• Loss of Benefits: You’ll miss out on the chance to get your loans out of default, regain access to income-driven repayment plans, and take advantage of Fresh Start benefits like loan forgiveness opportunities.

• Continued Financial Stress: Defaulted loans will continue to accrue interest and fees, potentially increasing your overall debt burden. Not resolving your default status could lead to ongoing financial challenges.

• Limited Options for the Future: Fresh Start is a limited-time opportunity. By not enrolling, it will be more difficult to return your loans to good standing in the future, and many of the protections available through the program will no longer be an option.

The Fresh Start Program is a unique, temporary program designed to help borrowers resolve their defaulted federal student loans, regain access to financial aid, and rebuild their financial future. Whether you have Direct Loans, Perkins Loans, or loans under the Federal Family Education Loan (FFEL) program, enrolling in Fresh Start gives you the opportunity to avoid collections, restore your credit, and explore student loan forgiveness options.

If you’ve been dealing with the stress of student loan default or struggling to make loan payments, the Fresh Start Program can help you get back on track. It’s also an important step to regain eligibility for benefits like deferment, income-driven repayment, and even federal aid such as FAFSA.

Don’t wait—this is a temporary program, and the opportunity to return to good standing won’t last forever. Take the first step toward solving your student loan debt by booking a consultation with one of our student loan experts today.

Whether you need help enrolling in the program, exploring loan forgiveness programs, or understanding your loan holder’s requirements, we’re here to help you find the best solution.