EVERYONE DESERVES A FRESH START
With the Biden Administration’s help, every one of the approximately 7.5 million borrowers in default will be automatically free from collections, like wage garnishment, and have their default status removed from their credit report.
Borrowers in default that apply for the Fresh Start Program will get their loans out of default and can immediately enroll in an income-driven repayment plan to reduce their monthly payments and start working towards Public Service Loan Forgiveness.
Benefits of Fresh Start
Beginning in early 2023, all borrowers in default were given these benefits. These benefits will last until one year after the payment pause ends, unless you apply for the Fresh Start Program.
- Stopped Involuntary Collections: Your wages will not be garnished. Tax refunds, child tax credits, social security payments, and disability benefits will not be withheld. You will no longer receive collection calls.
- Credit Reporting Changes: The Department of Education will report your loans as “current” (meaning in repayment) to all credit reporting agencies.
- Access to Federal Student Aid: You can access federal student aid to apply for grants and loans to return to school yourself, or for your children.
- Eligibility for Other Government Loans: The Department of Education will stop reporting your default status in the government credit reporting system, meaning you may become eligible for certain government-backed loans like mortgages.
- Ability to Rehabilitate Loans: Normally, borrowers can only get a loan out of default one time. Fresh Start does not count towards this limit, so if your loan goes into default again later you still have the chance to rehabilitate your loan and get back on track.
Borrowers that apply for Fresh Start will get their loans out of default, keep the automatic benefits for the long-term, and get additional benefits.
Apply for Fresh Start
Only certain loans are eligible for Fresh Start:
- Defaulted Direct Loan Program loans
- Defaulted Federal Family Education Loan (FEEL) Program Loans
- Defaulted Perkins Loans held by the Department of Education
If you’re not sure whether your loans qualify, you can call the Default Resolution Group at 1-800-621-3115 (TTY for the deaf or hard of hearing 1-877-825-9923).
After You Apply
Enroll in an Income-Driven Repayment (IDR) Plan
The Department of Education is also proposing a new rule that would create a new income-driven repayment plan with much-improved terms, such as halving the amount of discretionary income that borrowers have to pay towards their undergraduate loans and covering borrower’s unpaid monthly interest so a borrower’s balance will not increase as long as they make their monthly payments.
Submit a Public Service Loan Forgiveness (PSLF) Application
If you went into default after October 1, 2007, you may have some past qualifying payments to account for that will help you work towards forgiveness under PSLF. Submit a PSLF application for your past employers to get credit for those payments.
If not, submit a PSLF application for your current employer anyways. This will transfer your loan to MOHELA, which is the servicer that administers the PSLF Program.