The Student Loan Fresh Start Initiative: Are You Eligible?
If you’re like most student loan borrowers, you’re anxiously waiting to find out when student loan payments will resume. Currently, payments are set to begin either 60 days after the Supreme Court rules on President Biden’s student loan forgiveness program or 60 days after June 30, whichever comes first. There’s also a slim chance that Biden may extend the pause again, though it’s unlikely. Realistically, you have less than five months to figure out your budget. Fortunately, if you’re one of the estimated 3 million borrowers in default, you may qualify for additional assistance through the new Student Loan Fresh Start Initiative. Keep reading to learn more about this program, the benefits, and who qualifies.
Student Loan Fresh Start Initiative Overview
The U.S. Department of Education first announced its plans for a Student Loan Fresh Start Initiative on April 6, 2022, with the goal of helping defaulted borrowers. At that time, the press release stated that those with paused loans would “receive a “fresh start” on repayment by eliminating the impact of delinquency and default and allowing them to reenter repayment in good standing.” Unfortunately, no additional information on what the program would entail was included in the announcement. A few months later, however, more details emerged.
Fresh Start Initiative Benefits
There are several benefits offered as part of the Student Loan Fresh Start Initiative.
- Reinstated Access to Federal Student Aid. Those who take part in the Fresh Start Initiative will once again have access to federal student aid, including grants and loans.
- Second Chance at Student Loan Rehabilitation. Borrowers who previously took the one-time deal to rehabilitate their defaulted student loans before the pandemic get a second chance. This applies to all student loans, including those that were rehabilitated during the payment pause.
- Improved Government Loan Eligibility. The U.S. Department of Education will not report the default status of any borrower participating in the Fresh Start Initiative to the government credit reporting system (CAIVRS). This should improve borrowers’ chances of qualifying for government-backed loans and mortgages.
- Freeze on Collection Activity. Although collection activities have been paused since payments were put on hold, the pause will remain in effect for those in the Fresh Start Initiative even after payments resume. This protects from wage garnishment and tax offset, as well as other collection actions.
Additionally, the default status will be removed from credit reports and the loans will be reported as current.
How to Qualify For Student Loan Relief
If you currently have defaulted student loans, keep an eye out for communications from the U.S. Department of Education. They will send more information on the next steps for qualifying for the Fresh Start Initiative. Be sure to log into your studentaid.gov account to confirm your contact information so you don’t miss any important deadlines.
Which Loans Qualify?
Unfortunately, not all student loans will qualify for the Fresh Start Initiative. For example, borrowers who have Perkins Loans held by a school, Health Education Assistance Loan Program loans, or loans that are currently in litigation with the U.S. Department of Justice aren’t eligible. Private loans are also ineligible. Additionally, if you fail to maintain Satisfactory Academic Progress (SAP) or are ineligible for federal student aid due to other reasons, you are ineligible for the Fresh Start program until those issues are resolved.
If you are currently in default with any of the following loans, however, you may qualify for the program:
- Perkins Loans held by the U.S. Department of Education
- Federal Family Education Loan (FFEL) Program loans
- William D. Ford Federal Direct Loan (Direct Loan) Program loans
It’s important to note that any Direct or FFEL Program Loans that go into default after the payment pause is lifted later this year will no longer qualify for the Fresh Start Initiative. This means that you’ll lose your renewed eligibility for federal student aid and collections will resume. That’s why it’s so important to create a plan now to avoid future issues.
Don’t Wait to Take Action!
Although student loan payments won’t resume for a few months, now is the time to take action. Especially if you are worried that you won’t be able to afford the payments. There are various options available to help keep your loans out of default. One of those is an income-driven payment plan. Depending on your financial situation, when payments resume, they could be as low as $0 per month. If you’re interested in learning more, contact MoneySolver at 855-476-6920 for a free consultation. You can also visit the Federal Student Aid website to review your repayment options.