“Fresh Start” Initiative Puts Defaulted Borrowers in Good Standing
As if there haven’t been enough student loan headlines lately, we wanted to bring your attention to a specific opportunity for borrowers in default, as it’s not getting as much attention as it should.
Today, roughly 3 million people are in default on their federal student loans. It’s likely that some of your peers and staff are affected, but it’s not exactly a topic we voluntarily discuss…
Last year, the “Fresh Start” initiative was launched. It’s great news and we invite you to share it as appropriate.
Benefits of Fresh Start
ALL borrowers in default automatically get the benefits of Fresh Start temporarily… but you MUST apply to keep them long-term. The core benefits are:
- Loans to be Transferred from the Default Resolution Group to a Federal Servicer.
- “In Repayment” Status & Default Standing Removed from your Credit Report.
- Regain Access to Federal Student Aid.
- Stopped Collections.
- Restored Ability to Rehabilitate Loans.
- Access to Income-Driven Repayment (IDR) plans and Federal Forgiveness Programs (like PSLF).
Yep, it’s not hard to see that “Fresh Start” is a no-brainer for those in default…
But What if I Can’t Afford Repayment?
Yes, with Fresh Start you must begin repaying your loans after the CARES Act payment halt ends (this summer expected). However, the prospect of repayment today is not as overwhelming as it may have been in past years. The Income-Driven Repayment (IDR) plans can be extremely affordable as they have evolved in recent years. You don’t even start paying a portion of your income until your earnings eclipse $20k. Some statistics for perspective:
- HALF of Fresh Start participants will have a $0 payment and remain in good standing.
- 60% will pay less than $50/month.
How Do I Choose a Repayment Plan?
The student loan simulator at FSA can help you explore payment options. And if you’re working in a non-profit or government job, BenElevate can help you determine if Public Service Loan Forgiveness (PSLF) is available, as well as manage the requirements through our unique assessment and monitoring tools.
The average savings from PSLF today is $70k, but the program remains highly underutilized.
Which Loans are Eligible for Fresh Start?
- Defaulted Federal Direct Loan Program Loans (aka “Direct”)
- Defaulted Federal Family Education Loan (FFEL) program loans
- Defaulted Perkins Loans if they are held by ED
These loan types do NOT qualify:
- Direct and FFEL loans that default after the COVID-19 payment pause ends
- Defaulted Perkins loans held by schools
- Defaulted Health Education Assistance Loan Program loans
- Student loans remaining with the U.S. Department of Justice for ongoing litigation
How to Apply
To access Fresh Start, visit https://myeddebt.ed.gov/, where the process can take 10 minutes or less. Other options, including phone and “snail mail” information, are available on Federal Student Aid’s dedicated page.
Please note that BenElevate is your advocate; we work with borrowers on loan repayment strategy to maximize forgiveness, lower payments and complete required forms related to PSLF. We can’t access Federal Student Aid for you. That said, all the information you need to proceed is right here in this post.
If you’re in default, take advantage of Fresh Start before the opportunity goes away.
‘til DEBT do us part,
The BenElevate Team