December 11, 2023

Ins and Outs of the Fresh Start Program for Student Loan Borrowers in Default

Chipper Help

The student loan landscape in America remains in flux, and the Department of Education's "Fresh Start" program has marked a significant development in helping borrowers get on the path to a better financial future. Designed to provide relief for millions of student loan borrowers who found themselves in default before March 2020, this initiative is a much needed response to the financial difficulties exacerbated by the pandemic. But, they must enroll before September 2024 to receive all of the program benefits.

We have broken down the impact of the Fresh Start program can bring to over 7.5 million student loan borrowers -- from benefits reflected on their credit reports, to access to programs and more.

Who is Eligible for Fresh Start

Approximately 7.5 million borrowers with federal student loans in default can qualify for the Fresh Start program, covering various loan types including defaulted loans held by the Education Department and defaulted FFELP loans held by guaranty agencies.

  • You must have defaulted prior to the start of forbearance on March 13, 2020.
  • You are self-employed and have experienced a decrease in income of at least 25%.
  • You're single with an income less than $100,000, or you're married with an income less than $200,000, the following information applies.

Who is not Eligible for Fresh Start

Borrowers with private student loans, school-held Perkins Loans, Health Education Assistance Loan Program loans, loans under the purview of the U.S. Department of Justice. Additionally, borrowers who went into default after the payment pause are not eligible.

Restore Your Credit

Benefits Reflected on Your Credit Report

One of the primary benefits of the Fresh Start program is the removal of negative dings on borrowers' credit reports. This includes removal of the "default" flag in the credit database. Additionally, this will eliminate any loans from borrowers' credit reports that have been delinquent for over seven years. Finally, if a borrower defaults again after the Fresh Start initiative ends in September 2024, it won't restart the seven-year timeline for its appearance on a borrower's credit report.

Continued Credit Impact

Borrowers who have defaulted on their loans received several automatic benefits including suspended collection activities wage garnishments, seized tax refunds including child tax credits, withheld Social Security payments including disability benefits, and collection calls have been suspended until the Fresh Start initiative ends in September.

However, borrowers who do not enroll in Fresh Start can expect collections activities and credit reporting to resume when the Fresh Start initiative is over.

Regain Access to Additional Relief

Access to Repayment Options and Forgiveness

Re-entering good standing means borrowers who were in default can now access Income-Driven Repayment (IDR) plans and work toward Public Service Loan Forgiveness (PSLF).

Access to Short-Term Relief

Borrowers who have defaulted on federal student loans are unable to access short-term relief measures such as temporary payment forbearance or deferment. However, by enrolling in Fresh Start, you can be lifted out of default and regain access to these financial hardship relief measures.

Access to Additional Government-Backed Loans

One aspect of Fresh Start that requires no enrollment access to federal student aid, which includes federal loans, work-study and Pell Grants.

Borrowers who go through Fresh Start will also be able to access other types of government-backed loans, like mortgages.

Additional Rehabilitation Access

There are typically three ways out of default: rehabilitation, consolidation, or full loan repayment. However, rehabilitation and consolidation are one-time-only options. If you default again, your sole option is to repay the entire debt.

The Fresh Start initiative offers an alternative route out of default for those who have previously used other methods and fallen back into default. As part of this initiative, any borrower who rehabilitated their loans during the payment pause will also have the option to rehabilitate again if they default again.

A Fresh Start Opt-In is Required for Full Benefits

Enrolling in "Fresh Start" offers a range of benefits crucial for financial recovery. Key advantages include restoring loans to "current" status on credit reports, removing negative default marks, and providing access to federal student aid and various government loans.

The program also introduces flexible repayment options, including income-driven repayment plans, and a unique one-time adjustment for time spent in default during the payment freeze.

Some benefits, like access to federal student aid, were automatically granted to borrowers when payments resumed. However, there are several Fresh Start benefits that require enrollment in the Fresh Start program and a commitment to a repayment plan.

Without enrollment, borrowers risk losing all automatic benefits once the program concludes September 2024. It's crucial to stay informed and take advantage of this opportunity for a financial "Fresh Start."

Opt-In For the Fresh Start Program

Some benefits were automatic, but borrowers will need to opt into Fresh Start to keep them after the program expires.

If you’re already a Chipper member, simply confirm your personal information and opt-in. Borrowers who haven’t used the Chipper app can sign up for free to explore their repayment options, maximize forgiveness, and opt-in for Fresh Start.

The Road Ahead: Advocating for Borrower Support

As the "Fresh Start" initiative continues to impact borrowers and our members, raising awareness and simplifying the enrollment process remains a top priority for us and the administration. The Education Department, along with various organizations, is focused on ensuring that eligible borrowers are informed and able to take advantage of this unprecedented opportunity for financial rehabilitation. We’re here to help and are available to assist borrowers with any questions.

Use Chipper for Lower Payments

Chipper can help you find a student loan repayment plan that actually fits into your budget. You simply fill out your information and link your student loan account for us to generate your options in seconds. We help the average student loan borrower save over $300 a month off their student loan monthly payment. Lowering your monthly payment plan can game changing for your personal finance and can be done in minutes! Sign up for Chipper today to get on track with your student loans.

Use Chipper for The Best Path to Forgiveness

Finding your path to student loan forgiveness is easier than ever before. Chipper helps members find better Income-Driven Repayment (IDR) plans every day. Once enrolled in an eligible repayment plan, we can help you explore your forgiveness options and understand your path towards forgiveness. Sign up with Chipper today and get on track with your student loans.

Use Chipper for Round-Ups

Paying off your student loans doesn’t have to be a long and painful journey. Round-Ups are a way to directly pay off your loans with your everyday spending! By tracking your linked spending account(s), we will calculate the rounded up amount from each transaction in a week (IE spending $4.28 would add $0.72 to the weekly amount). We then initiate a payment towards your student loan for the weekly amount. Get chipping away on your student loans with Chipper today.

Use Chipper for Public Service Loan Forgiveness (PSLF)

The Public Service Loan Forgiveness (PSLF) program was created to provide relief to borrowers aiding the public sector. Unfortunately, 30% of applicants are denied due to incorrect paperwork. We can help! Chipper was created to solve this issue by assisting borrowers in understanding their options as well as allowing forgiveness eligible users enroll into the best forgiveness program available. Sign up for Chipper today to see your student loan forgiveness options and get the forgiveness you deserve.

Use Chipper for Teacher Loan Forgiveness (TLF)

The Teacher Loan Forgiveness (TLF) program was created to enable teachers working in Title 1 schools to receive student loan forgiveness of up to $17,500 (depending on their teaching subject). Chipper has helped teachers from all over the country qualify for TLF program and can help you get the forgiveness you deserve today. Find out if you qualify for forgiveness in minutes with our employer search tool.

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