Student Loan Forgiveness: Today is the last day to apply for this student loan debt relief program
If you have student loans that are in default, today is the last day to get them out of default through the Fresh Start program.
Before the pandemic-related payment pause that began in March 2020, more than 8 million federal borrowers were in default on their payments. student loans. Your loans are considered in default if you have missed payments for 270 days or more. Once student loans go into default, they are often no longer eligible forgiveness programs and other benefits of federal student loans. However, the Fresh Start program offers you a way to get your loans back in good standing qualify for debt relief.
The Fresh Start Program is a one-time offer from the Department of Education that allows you to move your student loans out of default while offering many other benefits. But there is a deadline: you must register before the end of the day, September 30, 2024. That’s how it works.
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What is the Fresh Start Program?
The Fresh Start Program is a temporary, one-time program from the Department of Education that can help you resolve your student loans. Your loans are considered in default status if you have missed more than 270 days of payments. Fresh Start has a simple application process and can return your loans to active repayment status in four to six weeks.
Normally, borrowers have two options to get loans out of default: student loan consolidation and rehabilitation, both of which can take several months. Fresh Start temporarily replaces rehabilitation – and offers several additional benefits.
“The Fresh Start Initiative is the best opportunity to get student loans out of trouble,” says Mark Kantrowitz, financial aid expert and CNET Money Expert reviewer.
Current benefits for borrowers with defaulted federal student loans
Between now and the end of September, all borrowers will automatically receive the following benefits:
- Pause collections: The Ministry of Education has halted collection activities for delinquent loans as of March 2020. You will not receive collection calls and will not be subject to wage, tax refunds or Social Security garnishments. Once your loans are no longer in default, you won’t have to worry about collection activity as long as you keep up with your monthly payments.
- Changes in credit reporting: The government also reports your loans as current to the credit bureaus, so you won’t see your accounts in collections on your credit report.
- Access to financial aid and government-backed loans: You may again be eligible for federal student aid, such as grants, work-study, and student loans. You may also have access to other types of government-backed loans, such as FHA mortgages.
After you apply for Fresh Start, you will also receive these additional benefits:
- Return to good standing: Your loans will be removed from default status and return to ‘in repayment’ status. They will also be transferred from the Default Resolution Group to a new loan servicer.
- Update credit history: By using Fresh Start, you can have the default removed from your credit history.
- Access to Federal Plans and Protections: You can choose any federal repayment plan, such as the standard 10-year plan, the graduated plan, or an income-driven repayment plan. You can also access forbearance and forbearance if you need to defer payments in the future.
- Renewed right to loan forgiveness: Your recovered federal loans are also eligible for federal forgiveness programs, such as Public Service Loan ForgivenessTeacher Loan Forgiveness or the Valued Education Savings program.
Your loans will automatically be included in the standard 10-year repayment plan upon non-default. But you can apply for an income-driven plan on the Federal Student Aid website.
Can Fresh Start help me get my student loan forgiven?
Yes. A major benefit of Fresh Start is that it restores your access to student loan forgiveness programs such as Public Service Loan Forgiveness and Teacher Loan Forgiveness. Each program has its own specific eligibility requirements, such as working in public service for a certain number of years and repaying your loans under a qualifying repayment plan.
You may also be eligible to have your remaining balance forgiven if you qualify for an income-driven repayment plan. For example, the SAVE plan offers loan forgiveness after 10 to 25 years, depending on your original loan balance and the type of loan. The other IDR plans waive the remaining balance after 20 or 25 years of payments. (Note: Forgiveness through SAVE is currently on hold, pending final resolution from federal courts.)
There’s more good news for borrowers using Fresh Start: Their payment counts won’t restart from zero, so you could be well on your way to receiving forgiveness through a program or IDR plan.
“[Borrowers] will receive credit for months of default… from March 2020 until the date they were no longer in default as a result of the Fresh Start initiative,” Kantrowitz said. “They will also receive credit for eligible payments made before they defaulted.”
Even if you don’t qualify for forgiveness programs, enrolling in an IDR can help lower your monthly student loan bill. According to the Department of Education, 80% of Fresh Start borrowers are moving to an income-driven repayment plan. About half of Fresh Start borrowers qualify $0 monthly payments with an IDR plan, while 60% pay less than $50 per month on their student loans.
How do I know if my loans are in default?
Because student loan payments have been suspended for more than three years, you may not be sure if your loans will go into default. There are a few ways you can check the status of your loans:
- Contact your lender: Your loan servicer will manage your student loans and can inform you of their status. You can find your loan servicer by logging into your Federal Student Aid account at StudentAid.gov with your FSA ID, your unique username and password. You can also call the Federal Student Aid Information Center at 1-800-433-3243.
- Log in to your Federal Student Aid account: You can also find your loan status on your Federal Student Aid account. On the dashboard, you will see a list of your federal student loans, including their balances, interest rates, and repayment status.
- Check your credit report: Another option is reviewing your credit reportwhich lists all student loans that are in default. You can receive a free copy of your credit report every week at AnnualCreditReport.com. However, contacting your loan servicer or logging into your Federal Student Aid account is probably your best bet, as your credit report may not have the most current information.
Are all loans eligible for the Fresh Start Program?
Any federal student loan borrower can qualify for a Fresh Start, but not all loan types qualify. These loans are all eligible for Fresh Start:
- Direct loans, such as Direct subsidized loans, Direct unsubsidized loans and Direct PLUS loans
- Federal Loans for Family Education
- Perkins Loans owned by the Department of Education
However, the following types of loans are not eligible for a Fresh Start:
- Perkins Loans from Schools
- Health Education Assistance Loan Program loans
- Loans that are part of ongoing litigation with the U.S. Department of Justice
- Direct or FFEL program loans that default after the end of the COVID-19 payment pause
If you have federal student loans that do not qualify for the Fresh Start program, you can choose loan consolidation to replace your ineligible loans with a new direct loan. This means your loans will no longer go into default if you agree to an income-driven repayment plan.
However, you need to consolidate quickly. While you can technically consolidate at any time, you can maximize your forgiveness options right now if you consolidate before the end of June.
Remark: Consolidating your loans takes them out of default but does not remove the record of default from your credit report.
How to Apply for the Fresh Start Program
There are three ways you can sign up for Fresh Start:
- Online: You can sign up for Fresh Start online by logging into your account at myeddebt.ed.gov. This is probably the easiest option if you know your login.
- By telephone: Call the Department of Education Default Resolution Group at 1-800-621-3115 (the TTY number is 1-877-825-9923). This conversation takes approximately 10 minutes.
- By post: Send a letter to PO Box 5609, Greenville, TX 75403. In addition to your request to enroll in Fresh Start, please include your name, mailing address, date of birth, and social security number. Your letter must be postmarked before October 1, 2024.
What happens if I miss the Fresh Start deadline?
If you miss the deadline to sign up for Fresh Start, you can still consolidate federal loans to get them out of default. But your payment count could start over at zero, meaning you’ll have to make payments for another 10 to 25 years as you work toward forgiveness.
Your other option, loan rehabilitation, removes the default from your credit report, but it takes much longer. You’ll need to make nine full payments over the course of ten months to get your loans out of default. You can only use Rehab once (although previously using Fresh Start will not count towards this one-time opportunity). More information about loan rehabilitation can be found at StudentAid.gov.
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