As we’ve been hearing recently, Federal student loan interest recently began accruing again for the first time since 2020, and payments will be due again in October. We now know about a new option for borrowers to possibly lower their payments, the new income-driven repayment plan called “SAVE”, as well as a couple of different options for loan forgiveness.
But, what about borrowers who were in default before the “payment pause” even went into place?
Default is generally defined as 270 missed payments, or roughly nine months, and has a number of serious consequences:
–Credit report and credit scores can be affected, making it really difficult to obtain other loans.
–Wages, tax refunds, and Social Security benefits can be garnished.
–Professional designations can be revoked.
Typically, student loan debt stays with you, even if you apply for bankruptcy. All in all, you don’t want to miss student loan payments; the interest and fees can really add up.
Some good news! For a limited time, there is an options for borrowers in default to get back on track. The “Fresh Start” program is a limited and one-time offer to transfer borrowers back into good status with their loans. Fresh Start initiated in December of 2022 and will be available until the end of 2023. Borrowers in default may apply for the program and, even better, then be eligible for “SAVE”, which could drastically lower monthly payment amounts.
“Half of borrowers on Fresh Start are paying $0 a month, and 60% of Fresh Start borrowers are paying less than $50 a month.” –Studentaid.gov
It takes about 10minutes to enroll in Fresh Start, either online or by phone. Your loans will be transferred from where they are sitting in default to a new service provider. You will be considered in “repayment status” rather than “default”. The record of “default” will be removed from your credit report.
And, you may just qualify for those lower payments!
Visit myeddebt.ed.gov or call 1-800-621-3115 to get started! Having your most recent Tax Return handy may help (but not required!).
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