Biden Issues Last-Minute Extension to Student Loan Fresh Start Program

President Joe Biden issued a last-minute extension for student loan borrowers, but they must act fast to be included under the Fresh Start program.
Now borrowers have until 3 a.m. EST Wednesday to join the program, which could help Americans evade default and use other student loan forgiveness tools. The original deadline for the program was Monday, but borrowers now have two more days to apply due to web issues that crashed or significantly slowed applications for many borrowers.
“Extended deadline!” wrote Department of Education Undersecretary James Kvaal on X, formerly Twitter, on Monday. “Until tomorrow, borrowers with defaulted loans have one more chance to get back into good standing.”
The Fresh Start program allows federal borrowers who are in default to not have their missing or late payments affect their credit report. It also protects them from wage garnishment and potentially having their Social Security benefits withheld in the future.
Fresh Start will help borrowers escape their default status, subsequently allowing them to qualify for future student loan forgiveness options down the line. The choices include income-driven repayment plans like SAVE, which have allowed some borrowers to significantly reduce their monthly payments or even decrease them to $0.
Biden originally approved Fresh Start when he created the off-ramp program, which delayed borrowers from seeing late or missing payments impact their credit history. That period, however, is scheduled to end on Monday, also Fresh Start’s original end date.
“Federal student loan repayment resumed almost exactly one year ago,” Michael Lux, an attorney and founder of Student Loan Sherpa, told Newsweek.
“Instead of moving forward with negative credit reporting, wage garnishment and other collection tactics, the on-ramp program prevented servicers from moving forward with these tactics. This protected borrowers who were confused by their repayment options or unable to track down their student loan servicer.”
To apply, visit myeddebt.ed.gov and log into your account or apply by mail. You can also apply by calling the Education Department’s Default Resolution Group at 1-800-621-3115.
You’ll also have a chance to apply for an income-driven repayment plan, potentially lowering your monthly payment significantly.
Some borrowers might believe there are limited consequences to not paying their monthly student loan payment, but if you choose not to pay, you might be setting yourself up for financial struggles down the road.
By not paying, you are increasing your loan amount through interest, which means you will be liable to pay more. You’ll also lose your eligibility for federal loan relief programs like forbearance, deferment or income-driven repayment plans, and no longer be able to apply for financial aid in the future.
Your credit score will also likely be tarnished, as loan servicers report your default status to credit bureaus, and you likely won’t qualify for a mortgage or car loan.
If you find yourself in default on your student loans, your credit score can quickly erode, which can trigger financial strife. The most severe obstacles will present themselves when borrowers try to buy a house or car. When lenders see your credit history with student debt, they will likely reject your application, blocking you from home and even car ownership.
Lux said even for borrowers who have fallen behind on their student loans, there are still many opportunities to improve your situation. “Delinquent borrowers can often get their loan current by simply calling and requesting a forbearance retroactive to when their financial hardship started,” Lux said. “At present, any borrower can sign up for the SAVE plan and be placed on a 0 percent interest forbearance that will last the duration of the SAVE lawsuit.”
The worst thing borrowers can do, however, is to ignore their federal student loans. “Once a delinquency becomes a default, things get harder to fix and the consequences become more severe,” Lux said. “In most cases, the longer you wait, the worse things become. The on ramp made ignoring federal student loans nearly consequence free, but now that it is over, borrowers will need to take action.”