![]() “Thirty-five percent of FICO score calculation is driven by a consumer’s past payment history,” he says, so removing frequent, recent or severe missed payments from your credit reports could mean big score improvements. “Some of these borrowers have been stuck in default with no option to resolve it other than by paying the loan in full,” Mayotte says, “so to give these borrowers a second chance could be extremely impactful to their long-term financial health.”Īccording to Ethan Dornhelm, vice president of scores and predictive analytics at FICO, the program could result in a substantial improvement to some borrowers’ credit scores. The record of missed student loan payments will be removed from your credit reports, and your student loan status will be changed from “in collections” to “current.”īetsy Mayotte, president of The Institute of Student Loan Advisors, calls this a “huge” opportunity for anyone with federal student loans in collections. Regain the chance to apply for federal student aid, including grants, loans and federal work study, to help you return to school, if desired. ![]() Become eligible for payment assistance again, including income-driven repayment as low as $0 per month, loan forbearance, deferment and student loan forgiveness. You can halt attempts to collect the debt, including the withholding of tax and federal benefits, wage garnishment and collection calls. Loans will be moved out of default, even if you’ve already used your one-time loan rehabilitation option. The Fresh Start program, which was announced in April 2022, is designed to help borrowers pull their federal student loans out of collections. “For the first time for many struggling borrowers, they can see a light at the end of the tunnel.”Īpplications for the Fresh Start program will be accepted for up to one year after the Covid-19 payment pause ends, which is scheduled to expire on December 31, 2022. “This program will help protect borrowers from a punitive student loan default system,” says Angelique Palomar, spokesperson for The Institute for College Access & Success. ![]() If you’re one of these borrowers, the Fresh Start Program can give you an opportunity to make your loan current again, renew your access to federal loan payment assistance and remove damaging information from your credit reports. You probably know about the pause on federal student loan payments, and you’ve heard about President Biden’s student loan forgiveness plan, but the Department of Education is offering additional relief for the roughly 7.5 million borrowers with student loans in collections. ![]() If you’ve fallen behind on your federal student loans, help could be on the way. ![]()
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