Student loans are a necessary evil in our economy, and as simple as they can be to pay back with some diligence and dedication, many students fail to do so long into their careers after they’ve finished college.
In fact, a small portion actually defaults on their loans, putting them in a less-than-favorable position for a fair amount of time.
Thankfully, the US Department of Education is well aware of this, and they’ve created the Fresh Start program in order to help provide benefits for these borrowers that defaulted on their loans.
These benefits are provided immediately, and they come in the form of restored access to student aid programs.
It’s important to note that this program is a one-time temporary form of assistance, and if you wish to benefit from it, you should act as soon as possible if you want to claim the full benefits it has to offer.
How does it work?
The best way to get started with the Fresh Start program is to contact your loan holder immediately, and if that happens to be the US Department of Education, you can get in touch with them either online, through the phone, or by sending in a physical letter.
On the other hand, if your loan is held by a guaranty agency, you’ll be forced to contact them instead, and if you’re unsure who’s the holder, the best way to find out would be to call 1-800-621-3115.
When you do get in touch with the ED over the phone, you should expect the entire process to last around 10 minutes, and a representative for the department will ask you to provide some personal information in order for them to locate your record.
This is when you’ll inform them that you’re applying for the Fresh Start program, which may also give you an opportunity to make use of an income-driven repaying plan, making your monthly payments substantially lower than with a standard one.
Once the program has helped you get out of default, it’s up to you to figure out what you’re going to do in order to repay the loan as fast as possible, and one of the best ways to do so is to opt for an affordable repayment plan.
Most borrowers that use the benefits from Fresh Start choose to enroll in an IDR plan, which essentially customizes your monthly payments in a way that they never exceed 10 or 20% of your income.
In fact, more than half of those that used Fresh Start benefits pay $0 every month, whereas the rest are paying under $50, which goes to show just how effective these repayment plans actually are.
In order to enroll, you’ll first have to provide info on your current circumstances, including but not limited to your family size, number of people your income supports, tax filing status, annual income level as well as your spouse’s adjusted gross income, although the last one only applies if you’re filing separately while married.
Everyone who defaults has access to Fresh Start benefits, but this form of assistance is only available for a short amount of time, and you’ll have to act immediately if you want to keep collecting these benefits permanently.
If you don’t the benefits will end within a year after the payment pause has ended, putting you back to square one in terms of paying back your debt.
If you do choose to utilize Fresh Start assistance as soon as possible, you may be entitled to a number of perks, such as the aforementioned IDR plans, student loan forgiveness programs, and finally, short-term relief.
While student loan forgiveness isn’t normally available to anyone who defaults on their loan, Fresh Start offsets this, allowing you to get out of default immediately and regain the ability to apply for these programs once more.
Fresh Start is available for a number of different loans, ranging from defaulted direct loans to Perkins loans held by the Department of Education.
Putting yourself through education is about as expensive as it is important, and it’s why so many Americans end up taking out a loan to fund their pursuit of knowledge.
Because of this, many are forced to pay back these loans for years on end, some even carrying them deep into their careers, which can easily become a burden on their household’s financial security.
With the help of Fresh Start, Americans who default on their loans can regain the ability to apply for federal assistance programs and loan forgiveness, making this process much easier on them.
You should remember that Fresh Start is only temporary assistance, and if you don’t make use of it immediately, you’ll lose out on all the benefits you could gain access to permanently.