On Aug. 24, Joe Biden unveiled a federal student aid relief program that will relieve up to $20,000 for borrowers, depending on their income and other factors. Whereas borrowers in student loan default aren't eligible for that relief, they may qualify for the Fresh Start student loan program. How does the Fresh Start Program work?
Debt default can be difficult to get out of, as once you've defaulted, restrictions are placed on the debt you owe. When it comes to student loans, defaulting can restrict a borrower from changing their payment plan, receiving additional student aid, or opting for forbearance and deferred payments.
The Fresh Start Program first started with IRS tax debt
Launched in 2011, the Fresh Start Program, or Fresh Start Initiative, is a tax relief program that provides flexibility to those who are in tax debt and can’t afford to pay it. Those eligible can be put on a tax payment plan, where the monthly payment doesn't exceed what the borrower can afford.
The Fresh Start Program is similar to other student loan relief programs, where Federal Student Aid puts borrowers on a restructured payment plan and a portion of the debt may be forgiven. When a person with tax debt joins Fresh Start, a portion of their tax debt may be forgiven, as long as they make their payments on time.
What's the Fresh Start student loan program about?
In April 2022, the U.S. Department of Education announced the Fresh Start student loan program, which aims to bring approximately 7.5 million borrowers out of default, so they can have the opportunity to make repayments again and be in good standing.
Those eligible for the initiative will be able to temporarily regain access to student aid and other benefits of being a federal student loan borrower, such as being able to apply for federal grants and loans and having collections stopped. Collections are when a borrower in default may have portions of their tax refunds, salary, or social security payments withheld by the federal government.
How to apply for the Fresh Start student loan program
Federal Student Aid says it will reach out to eligible borrowers in default throughout the year, providing information on what actions to take. The agency also says that other benefits for the program will be introduced later this year, such as various options for repayment, forbearance and deferment, and loan forgiveness.