What Is the Fresh Start Program?

The Fresh Start program was a temporary initiative that allowed you to bring your defaulted federal student loans back to good standing. If you enrolled before the Oct. 2, 2024 deadline, you could have the default status removed from your credit report and resume loan repayment on an income-driven repayment plan. Here's everything you need to know about the Fresh Start program and how it works.

What is the Fresh Start program?

The Fresh Start program was launched by the U.S. Department of Education in April 2022 to help borrowers with defaulted federal student loans. Student loans normally go into default when you're 270 days late on a payment and it can lead to serious consequences, like having the full balance immediately due, wage garnishment, or even liens on your property.

The Fresh Start program was designed to help you avoid the consequences of default. Once enrolled, your loans are taken out of default, the default is removed from your credit history, and your loan is transferred to a new servicer. Once your new servicer contacts you, you could also sign up for an income-driven repayment plan to make your monthly payments more manageable.

Who is eligible for Fresh Start?

As of Oct. 2, 2024, the Fresh Start program is no longer accepting new enrollments. Before the deadline, you would have qualified if you had certain types of federal student loans in default, including:

• William D. Ford Federal Direct Loan (Direct Loan) program loans
• Federal Family Education Loan (FFEL) program loans
• Perkins Loans held by the U.S. Department of Education

If your FFEL program loans went into default during the COVID-19 pandemic, you weren't eligible for Fresh Start. Instead, your loans were automatically removed from default.

Up until Oct. 2, 2024, anyone in default was eligible for benefits like a pause on collections, removal of the default from their credit report, and access to federal aid. But only those who enrolled by the deadline had their loans transferred to a new servicer and restored to good standing, with the option to start repayment or apply for forgiveness.

How does Fresh Start work?

Fresh Start allows you to remove your federal loans from default and restore them to current status. After signing up for Fresh Start online, by phone, or by mail before the Oct. 2, 2024, deadline, your loans are transferred to a new servicer, and the default is erased from your credit report.

Once the new servicer takes over, your loan gets placed on the Standard Repayment Plan. You could also switch to an income-driven repayment plan, which adjusts monthly payments to 5% to 20% of your discretionary income.

Borrowers who get out of default can also apply for deferment or forbearance and can work toward loan forgiveness through the Public Service Loan Forgiveness (PSLF) program. Fresh Start participants also benefit from renewed access to federal benefits programs, including access to student loans and grants that you can qualify for by submitting the FAFSA.

Key benefits of Fresh Start

The Fresh Start program offers several key advantages for borrowers in default:

• Loans restored to current status: Your loans are taken out of default and placed back into repayment, giving you a clean slate without the need to pay off the entire balance immediately.
• Improved credit: The default is removed from your credit history, which could boost your credit score and improve your standing with potential future lenders.
• Protection from penalties: You no longer face wage garnishment, liens, or other collection activities that come with defaulted loans.
• Restored access to federal aid and benefits: You regain access to federal student aid programs, including loans and grants, which means you can borrow again if you decide to return to school. You also become eligible for income-driven repayment plans and loan forgiveness programs like Public Service Loan Forgiveness.

Tips for avoiding default in the future

Fresh Start gives you a second chance, but it's crucial to stay on track to avoid defaulting again. These tips can help you to avoid defaulting again in the future:

• Sign up for an income-driven repayment plan: These plans adjust your payments based on your income and family size to help make repayment more affordable.
• Understand your deferment and forbearance options: If you can't make your monthly payments, consider deferment or forbearance as temporary solutions. While income-driven plans are often the better choice, deferment or forbearance can pause payments if you're facing financial hardship. Just remember that interest may continue to accrue, increasing your loan balance.
• Set up automatic payments: Autopay helps you never miss a payment by automatically withdrawing the amount due from your bank account. Plus, many lenders offer a 0.25 percentage point rate discount when you enroll in autopay.
• Monitor your finances regularly: Keeping tabs on your budget, including spending and income, can help to ensure you have the money you need to pay your student loans.

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FAQ

How do I know if I qualify for the Fresh Start program?

To qualify for the Fresh Start program, you must have signed up by Oct. 2, 2024. You must also have defaulted on Direct Loans, FFEL program loans, or Perkins Loans held by the U.S. Department of Education.

What happens to my credit score after I complete the Fresh Start program?

Once enrolled in Fresh Start, your loan gets marked as current, which helps improve your credit score. As you continue to make on-time payments, your score can keep improving thanks to a positive payment history.

Can I enroll in the Fresh Start program more than once?

No, enrollment for Fresh Start ended on Oct. 2, 2024, and is no longer available.

What are the risks of not addressing a student loan default?

Ignoring student loan default can severely damage your credit, block access to federal student loans and other benefits, and lead to collection actions like wage garnishment or property liens.