Student loan borrowers have just a few months to get their loans out of default or risk wages being taken.
The federal Fresh Start program allows borrowers to reverse their debt out of default so they can avoid costly consequences like wage garnishment or even lost tax refunds or Social Security payments. The deadline to apply is September 30.
“The Fresh Start program is essentially a restarting tool for student loans that have [gone] into default,” Alex Beene, a financial literacy instructor for the state of Tennessee, told Newsweek.
“While not a forgiveness program, it does allow student loan holders to form a new pathway to get them back on track in the process. Student loan holders should undoubtedly take advantage of this plan, as the debt isn’t going away, and it offers a way out for those who don’t have one.”
ANDREW CABALLERO-REYNOLDS / AFP
Typically, repercussions like lost wages hit after borrowers miss payments for 270 or more days, but the Fresh Start program offers a special way to bypass those hassles and get the loans back in good standing.
“If you put off making your payments or had hardships that made it feel impossible, you are not alone, and there are options,” Illinois Attorney General Kwame Raoul recently said in a statement. “Borrowers can bring their student loans out of default by signing up for the Department of Education’s Fresh Start program before time runs out.”
Federal student loan payments were paused during the COVID-19 pandemic but restarted in October.
While Michael Lux, the founder of The Student Loan Sherpa, called Fresh Start a “golden opportunity” for borrowers, he cautioned it is limited to borrowers who were already in default before the COVID payment pause.
“While there are other methods to getting out of default, the other approaches are far more complicated and time-consuming,” Lux told Newsweek. “Rather than using one of these limited resources, Fresh Start is the preferred option.”
For many who take advantage of the program, it could also open the door to Biden’s SAVE repayment plan, which offers $0 per month payments and progress toward full student loan forgiveness.
“Look at Fresh Start as a get-out-of-jail-free card,” Lux said. “Rather than having to rehabilitate the loan, it is instantly brought current, and borrowers can enroll in the SAVE repayment plan.”
You can apply by logging in to your Federal Student Aid (FSA) account at studentaid.gov.
The Department of Education has approved several full forgiveness programs for student loan borrowers since President Joe Biden took office.
Recently, Biden said 74,000 more borrowers would earn $5 billion in relief, including 44,000 public servants. The other tens of thousands of borrowers included those who have made at least 20 years of payments on income-driven repayment plans.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.