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Student Loan Default and Fresh Start From the US Department of Education

Student loan default can be scary, but if it’s something you are currently in or concerned about, you should not ignore it! Let’s talk about the Department of Education’s new Fresh Start program to help borrowers get out of default and back on track with their loans. 

What is loan default?

Default is when a person with loans does not make payment for 270 days, or nine months. If for some reason you go nine months without making payments, you will enter into default. Defaulting on your loans can have serious consequences to your credit score, which means it’s not something to take lightly.

Fresh Start program

Because of the COVID-19 pandemic, student loans have hit a lot of uncharted territory in the past few years. Many borrowers thought that was a good thing because  payments were paused and interest was not incurring. For those who were in default before the pandemic, things got a little better as well. 

Fresh Start is a new program that allows individuals who entered default before the pandemic to return to good standing with their loans. Your loan amount won’t necessarily change, but you will likely be able to enter into a new payment plan with lower monthly payments. This means you’ll have a better chance to pay your loan payment each month. You’ll also be able to pick your credit score back up and get back to good standing with your loans. Read on to see what other benefits are included in this plan and how to enroll!

How do you sign up for Fresh Start?

Signing up for Fresh Start is simple. The following information comes directly from the Student Aid website:

  • Online – Go to myeddebt.ed.gov and log in to your account. This is the easiest option if you know your login.
  • By phone – Call 1-800-621-3115 (If you are deaf or hard of hearing, the TTY number is 1-877-825-9923)
  • By mail – You’ll need to write a letter stating the following: “I would like to use Fresh Start to bring my loans back into good standing.” You’ll need to include your social security number, name and date of birth as well and mail it to P.O. Box 5609, Greenville, TX 75403

After you enroll

After you enroll, you’ll need to choose a payment plan. Most individuals choose an income driven repayment plan (IDR) which bases their monthly payment on how much they make each month. Depending on your job, you may also be eligible for the Public Service Loan Forgiveness program. The PSLF program allows you to make 120 qualifying payments towards your loan and then apply to have the remainder of your loan forgiven. 

Automatic benefits and enrolled benefits

While some of the benefits to the Fresh Start program are automatic, you will still need to enroll in order to claim all the benefits and continue to claim even the automatic credits once this initiative ends. So, let’s look at automatic benefits first!

Automatic benefits

Access to federal student aid, as well as other government loans

Individuals who have defaulted on their loans are typically unable to take out any more loans or take advantage of things like federal grants or work study. However, with the Fresh Start program, individuals will be eligible for these things again. 

No collections until Fresh Start expires

With Fresh Start, defaulted loans will not need to be repaid until the program has ended. This means that until September of 2024 you will not need to worry about wage garnishment, seized tax refunds, seized tax credits, or withheld social security payments. 

A second chance for those who have already defaulted or gone through rehabilitation

Typically, those who default on their loans have one shot to rehabilitate their loans. Rehabilitating your loans means that you agree to make nine out of ten on time monthly payments in a row. Usually you are only allowed to do this one time, however, the Fresh Start program is a second chance to get out of default. 

Enrolled benefits

Fresh start will show up on credit reports

Perhaps one of the biggest benefits to the Fresh Start program is that your defaulted loans will be removed from your credit reports. Usually a defaulted loan affects your credit for as long as seven years and potentially even longer.

Access to repayment options and forgiveness

Those who default on their loans have fewer options when it comes to paying them off. However, with this program, you’ll once again have access to things like income driven repayment plans and public service loan forgiveness plans. Borrowers who use these options are more likely to make payments on time.

If you default again, your original date of delinquency will be used

If you do end up defaulting again, this program will not restart the seven year delinquency timeline. So, if your original date of delinquency was January of 2019 and you end up missing a payment again in January of 2025 after you enrolled in Fresh Start, your 2019 date will be used instead of the 2025 date. This is important because loans that are delinquent for seven years usually don’t appear on credit reports. 

What if you go into default again?

Defaulting again will look different depending on what course of action you previously took when you defaulted. If the Fresh Start program is the first step you’ve taken to get out of default, you’ll still be able to rehabilitate your loans if you default again. 

If you’ve previously rehabilitated your loan and then took advantage of the Fresh Start program, you will not be eligible to rehabilitate your loan again.

Key Takeaways

Key Takeaways

  • Fresh Start is a new initiative from the Department of Education that is meant to help borrowers who defaulted before the pandemic get back to good standing with their loans
  • Signing up for Fresh Start can be easily done by mail, phone or online
  • While some benefits may be automatically applied to your loans, you’ll need to officially enroll in the program in order to secure all the benefits even after the initiative ends
  • The Fresh Start program is currently available and will be open for you to enroll through September of 2024, though it is recommended you sign up as soon as possible so that your application has time to process
Key Takeaways

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Frequently asked questions about Fresh Start

Will Fresh Start affect my ability to enroll in other programs?

No, Fresh Start will not affect your ability to enroll in other programs.

How long does it take to enroll in Fresh Start?

The actual enrollment process should not take very long. By phone it is estimated that the process should only take about ten minutes. However, it may take between 4-6 weeks for your application to be processed. You will receive confirmation of your enrollment by mail. If you have not received anything, call to inquire to make sure that your loan is being correctly processed.

Is Fresh Start legit?

Yes, Fresh Start is completely legit. However, that doesn’t mean you shouldn’t be aware of scams that may arise. Only trust information from reliable sources. No person should ever ask you for any money in order to enroll in this program. Remember, you should only provide information to the official student aid website, your loan servicer, or by mail to the address listed above in this article.