What Is the Fresh Start Program for Student Loans?

The Fresh Start Program was a temporary federal initiative that assisted student loan borrowers in default. It provided a pathway for millions of Americans to bring their federal student loans back into good standing. The program aimed to alleviate financial and credit-related burdens associated with default, helping borrowers achieve a more stable overall financial footing.

Understanding the Fresh Start Program

The Fresh Start Program was a temporary initiative launched by the U.S. Department of Education in April 2022. Its objective was to help federal student loan borrowers in default restore their loans to good standing. The program applied to specific types of federal student loans that were in default when the COVID-19 student loan payment pause began.

To qualify, borrowers needed defaulted federal student loans from the William D. Ford Federal Direct Loan Program, Federal Family Education Loan (FFEL) Program loans (including those held by the Education Department and commercially held), or Perkins loans held by the Education Department. Loans that defaulted after the payment pause ended were not eligible. The program was for those who had fallen behind on payments and entered default status, which typically occurs after 270 days of non-payment.

This initiative offered a streamlined approach to exit default, bypassing traditional loan rehabilitation or consolidation processes. The Fresh Start Program ended on October 2, 2024, at 2:59 a.m. Eastern Time, and new enrollments are no longer accepted. Those who did not enroll by the deadline still have other options for addressing defaulted loans, such as loan rehabilitation or consolidation, though these processes differ from the Fresh Start provisions.

Key Benefits and Features

The Fresh Start Program offered several advantages for eligible borrowers. A primary benefit was the removal of the defaulted status from federal student loans. This action immediately returned the loans to “in repayment” status without requiring them to pay the entire outstanding balance.

The program also addressed significant credit reporting issues. For borrowers who enrolled, the record of default was removed from their credit reports, and the loans were reported as “current.” This change could lead to an improvement in credit scores, potentially making it easier for individuals to qualify for other forms of credit, such as mortgages or car loans, at more favorable interest rates. Additionally, borrowers regained eligibility for federal student aid, including grants and new federal student loans, which could allow them to return to school and complete their education.

Enrolled borrowers saw an immediate halt to involuntary collection activities. This included the suspension of wage garnishments, the withholding of tax refunds (including child tax credits), and the offset of Social Security payments. The program also restored access to various repayment options, including income-driven repayment (IDR) plans, which base monthly payments on a borrower’s income and family size. Access to student loan forgiveness programs, such as Public Service Loan Forgiveness, was also restored for those who qualified.

Enrolling in the Program

Enrollment in the Fresh Start Program was a straightforward process. Individuals had three primary methods to enroll. The most direct option was contacting the Education Department’s Default Resolution Group by phone at 1-800-621-3115. This phone call typically took around 10 minutes.

Another method for enrollment was through the online portal at myeddebt.ed.gov. Borrowers with an existing login could access their account and follow the prompts. For those who preferred written communication, enrollment was possible by mail. Borrowers could send a letter to P.O. Box 5609, Greenville, TX 75403, including their name, Social Security number, date of birth, current mailing address, and a statement requesting Fresh Start enrollment.

It was important for borrowers to know whether their loans were held by the Education Department or a guaranty agency, as the contact method could vary. If loans were held by a guaranty agency, borrowers needed to contact that specific agency.

After Enrollment

Once a borrower enrolled in the Fresh Start Program, several changes occurred regarding their federal student loans. The defaulted loans were transferred from the Default Resolution Group or guaranty agency to a new federal loan servicer. The loans were then returned to “in repayment” status, signifying their removal from default.

The removal of the default record from the borrower’s credit report was a key outcome. This could lead to an improvement in credit scores over time, as negative default information was no longer actively reported. While the initial impact on credit scores could vary, many borrowers saw significant increases, with some experiencing a median increase of over 50 points.

Following the transfer to a new loan servicer, borrowers received communication, typically within a few weeks. Upon notification, borrowers became eligible to apply for various repayment plans, including income-driven repayment (IDR) plans. While loans were initially placed on a Standard Repayment Plan, many borrowers opted for an IDR plan, which adjusts monthly payments based on income and family size, often resulting in lower, more manageable payments. This step was crucial for establishing a sustainable long-term repayment strategy and avoiding future default.