If you have been struggling with understanding student loans and its implications, rest assured you are in good company. There have been numerous developments in the past few months including new repayment plans, forbearances, and lawsuits, but more importantly, dates are coming up that you have to be ready for. Among the most important of these is the looming September 30, 2024, deadline for the Fresh Start program. Now this is what I believe you should be aware of and what other options you might have before the year runs out and the door shuts.
Fresh Start Program Ends September 30, 2024
The Fresh Start Program was introduced by the U.S. Department of Education as part of its COVID-19 relief for borrowers with federal student loans in default. This initiative gave borrowers a chance to get their loans back on track and improve their credit by removing default records. If you haven’t signed up yet, now is your last chance. Here’s how the program works:
- Defaulted loans are transferred to a loan servicer from the Default Resolution Group or a guaranty agency.
- Loans return to repayment status, and the default is removed from your credit report.
- Repayment plans: Borrowers are automatically placed on a 10-year repayment plan, but you can switch to an income-driven plan if that’s more affordable.
- Other benefits: You’ll regain access to federal student aid, and collection calls will stop.
Borrowers who want to apply still have until September 30, 2024, to enroll. Missing this deadline means losing access to these benefits, so don’t delay if this applies to you.
End of the Student Loan ‘On-Ramp’ Period
One additional significant date to keep in mind is the 30th of September, 2024, which signifies the conclusion of the student loan ‘on-ramp’ period. This was a temporary measure for the borrowers who had not begun repaying their loans when the pandemic hit. During this time, missed payments did not affect borrowers’ credit scores or go to collection agencies but this is set to change.
As of the 1st of October, 2024, any borrower who fails to make his or her scheduled payments will be in for a rude shock. This can take the form of wage garnishments, Tax offsets, and even returning the loans to collection agencies. If you have delayed payments up to this moment, it is about time you draft a payment plan before the imposition of fines.
What Happens if the Government Shuts Down?
While a government shutdown may affect many federal services, your loan payments are still due. Most loan servicers are private companies, so they’ll continue operating as usual. However, processes that require the U.S. Department of Education’s involvement—like loan forgiveness approvals—could be delayed.
If you’re currently waiting on loan consolidation or forgiveness, a shutdown could add more time to your wait. It’s important to stay on top of any communication from your loan servicer during this time.
The SAVE Plan and Ongoing Lawsuits
For individuals who signed up for the SAVE income-driven repayment plan, the situation is far from settled. Its application has been postponed owing to the legal hurdles, with the primary court session not provided until October 25, 2024. Should the plan be permanently enjoined, a different repayment plan shall have to be opted for.
Although the payments are on hold for the borrowers on the SAVE plan, the prior interest is not accruing. Also, take note of legal developments to know whether this plan will be implemented or whether it will be necessary to pick another one.
What’s Next for Biden’s New Forgiveness Plan?
In addition, the Biden administration has been making strides in implementing a focused student debt cancellation plan. The plan intends to provide cancellation of educational loans for those individuals whose debts at present are more than those when they commenced repaying their loans and provides support to those who have been borrowers for many years.
Nonetheless, this strategy was prevented from being implemented by a ruling from the court on 5th September 2024. The next session will take place later on in the month but this court case is likely to continue even beyond 2025.
The Bottom Line
Time is running out to take advantage of programs like Fresh Start, and the student loan landscape remains complicated. Be sure to meet the September 30, 2024, deadlines and stay informed about ongoing changes. With so much uncertainty, now is the time to act and secure your best options for repaying or forgiving your loans.
