The student loan landscape in America remains in flux, and the Department of Education's "Fresh Start" program has marked a significant development in helping borrowers get on the path to a better financial future. Designed to provide relief for millions of student loan borrowers who found themselves in default before March 2020, this initiative is a much needed response to the financial difficulties exacerbated by the pandemic. But, they must enroll before September 2024 to receive all of the program benefits.
We have broken down the impact of the Fresh Start program can bring to over 7.5 million student loan borrowers -- from benefits reflected on their credit reports, to access to programs and more.
Who is Eligible for Fresh Start
Approximately 7.5 million borrowers with federal student loans in default can qualify for the Fresh Start program, covering various loan types including defaulted loans held by the Education Department and defaulted FFELP loans held by guaranty agencies.
- You must have defaulted prior to the start of forbearance on March 13, 2020.
- You are self-employed and have experienced a decrease in income of at least 25%.
- You're single with an income less than $100,000, or you're married with an income less than $200,000, the following information applies.
Who is not Eligible for Fresh Start
Borrowers with private student loans, school-held Perkins Loans, Health Education Assistance Loan Program loans, loans under the purview of the U.S. Department of Justice. Additionally, borrowers who went into default after the payment pause are not eligible.
Restore Your Credit
Benefits Reflected on Your Credit Report
One of the primary benefits of the Fresh Start program is the removal of negative dings on borrowers' credit reports. This includes removal of the "default" flag in the credit database. Additionally, this will eliminate any loans from borrowers' credit reports that have been delinquent for over seven years. Finally, if a borrower defaults again after the Fresh Start initiative ends in September 2024, it won't restart the seven-year timeline for its appearance on a borrower's credit report.
Continued Credit Impact
Borrowers who have defaulted on their loans received several automatic benefits including suspended collection activities wage garnishments, seized tax refunds including child tax credits, withheld Social Security payments including disability benefits, and collection calls have been suspended until the Fresh Start initiative ends in September.
However, borrowers who do not enroll in Fresh Start can expect collections activities and credit reporting to resume when the Fresh Start initiative is over.
Regain Access to Additional Relief
Access to Repayment Options and Forgiveness
Re-entering good standing means borrowers who were in default can now access Income-Driven Repayment (IDR) plans and work toward Public Service Loan Forgiveness (PSLF).
Access to Short-Term Relief
Borrowers who have defaulted on federal student loans are unable to access short-term relief measures such as temporary payment forbearance or deferment. However, by enrolling in Fresh Start, you can be lifted out of default and regain access to these financial hardship relief measures.
Access to Additional Government-Backed Loans
One aspect of Fresh Start that requires no enrollment access to federal student aid, which includes federal loans, work-study and Pell Grants.
Borrowers who go through Fresh Start will also be able to access other types of government-backed loans, like mortgages.
Additional Rehabilitation Access
There are typically three ways out of default: rehabilitation, consolidation, or full loan repayment. However, rehabilitation and consolidation are one-time-only options. If you default again, your sole option is to repay the entire debt.
The Fresh Start initiative offers an alternative route out of default for those who have previously used other methods and fallen back into default. As part of this initiative, any borrower who rehabilitated their loans during the payment pause will also have the option to rehabilitate again if they default again.
A Fresh Start Opt-In is Required for Full Benefits
Enrolling in "Fresh Start" offers a range of benefits crucial for financial recovery. Key advantages include restoring loans to "current" status on credit reports, removing negative default marks, and providing access to federal student aid and various government loans.
The program also introduces flexible repayment options, including income-driven repayment plans, and a unique one-time adjustment for time spent in default during the payment freeze.
Some benefits, like access to federal student aid, were automatically granted to borrowers when payments resumed. However, there are several Fresh Start benefits that require enrollment in the Fresh Start program and a commitment to a repayment plan.
Without enrollment, borrowers risk losing all automatic benefits once the program concludes September 2024. It's crucial to stay informed and take advantage of this opportunity for a financial "Fresh Start."
Opt-In For the Fresh Start Program
Some benefits were automatic, but borrowers will need to opt into Fresh Start to keep them after the program expires.
If you’re already a Chipper member, simply confirm your personal information and opt-in. Borrowers who haven’t used the Chipper app can sign up for free to explore their repayment options, maximize forgiveness, and opt-in for Fresh Start.
The Road Ahead: Advocating for Borrower Support
As the "Fresh Start" initiative continues to impact borrowers and our members, raising awareness and simplifying the enrollment process remains a top priority for us and the administration. The Education Department, along with various organizations, is focused on ensuring that eligible borrowers are informed and able to take advantage of this unprecedented opportunity for financial rehabilitation. We’re here to help and are available to assist borrowers with any questions.
