What Is the Fresh Start Program for Student Loans?
Learn how the Fresh Start Program helps federal student loan borrowers in default regain financial stability and manage their repayment.
The Fresh Start Program was a temporary initiative launched by the U.S. Department of Education (ED) in April 2022. It was designed to assist federal student loan borrowers in default, providing a path for millions to bring their loans back into good standing. The program aimed to remove the negative consequences of default and help borrowers re-engage with their student loan obligations, particularly in response to financial challenges during the COVID-19 pandemic and associated payment pause.
Understanding Eligibility
The Fresh Start Program targeted federal student loans that were in default prior to the COVID-19 payment pause, which began on March 13, 2020. Eligible loans included those from the William D. Ford Federal Direct Loan Program, Federal Family Education Loan (FFEL) Program loans (both ED-held and commercially held), and defaulted Perkins Loans held by the Department of Education. Approximately 7.5 million borrowers with federal student loans in default were eligible.
Certain loan types were not included in the program. These exclusions comprised defaulted Perkins Loans held by schools, Health Education Assistance Loan Program loans, and student loans involved in ongoing litigation with the U.S. Department of Justice. Direct Loans and FFEL Program loans that entered default after the end of the COVID-19 payment pause were also not eligible.
Program Benefits
A primary benefit of the Fresh Start Program was the removal of the default status from the borrower’s credit report, with loans being reported as “current.” This action also included the removal of the default from the federal Credit Alert Verification Reporting System (CAIVRS), which could improve eligibility for other government loans, such as mortgages. Collection activities, such as wage garnishment and tax refund offsets, were suspended for enrolled borrowers.
The program also restored eligibility for federal student aid, including Pell Grants and other federal student loans, allowing borrowers to continue their education. Fresh Start enabled borrowers to re-enter repayment in good standing and gain access to various repayment plans, including income-driven repayment (IDR) plans. These plans can customize monthly payments based on income and family size, potentially reducing payments to as low as $0. The program also restored the ability to postpone payments through deferment or forbearance and made borrowers eligible for loan forgiveness programs, such as Public Service Loan Forgiveness.
Enrollment Steps
While some benefits of the Fresh Start Program, such as restoring access to federal student aid, were applied automatically, borrowers needed to take action to claim full benefits and officially exit default. The Fresh Start Program officially ended on October 2, 2024.
During the enrollment period, borrowers contacted their loan holder. For loans held by the Department of Education, this involved logging into an online account, calling a resolution group, or sending a letter. If loans were held by a guaranty agency, borrowers contacted that specific agency. The process typically involved providing personal identification and stating the purpose was to use Fresh Start to resolve defaulted loans.
Life After Fresh Start
Borrowers who successfully utilized the Fresh Start Program had their defaulted loans transferred to a new loan servicer and returned to “in repayment” status. While borrowers were initially placed on a Standard Repayment Plan, they were encouraged to choose a suitable repayment plan to prevent future default. Options included standard, graduated, or income-driven repayment (IDR) plans.
It was crucial for borrowers to select a repayment plan that aligned with their financial situation to maintain good standing. Borrowers could apply for an IDR plan once their Fresh Start enrollment was processed. If financial hardship re-emerged, options such as deferment or forbearance were available to temporarily postpone payments. However, re-defaulting after utilizing Fresh Start would result in losing the regained benefits and facing the consequences of default again.