On Friday, the Education Department’s Fresh Start policy was given direction by Federal Student Aid (FSA) Director Richard Cordray to the private corporations that retain defaulted student loan, also referred to as guarantor agencies.
The plan would enable borrowers who are behind on their payments or in default to restart repayment in good standing. It was described in a news release along with the announcement of an earlier extension of the payment halt through August.
Can A Borrower Pause Payment?
The program would offer borrowers who are currently in default roughly 7.5 million of them one year after payments start-up to take the required actions to get themselves back into good standing.
The suspension of student loan payments has recently been extended by President Joe Biden through June 30 or, if earlier, until the cases that are now preventing debt relief are settled.
James Kvaal, the undersecretary of education, stated at a conference on student aid last week that today, more than seven and a half million borrowers have a loan in default. Nothing good comes from loan default since it digs borrowers who are already in financial trouble even further into a hole. That’s about one in six people who have debt.
The collection activities for borrowers in the Fresh Start program must be put on hold for a year after the payment pause ends, per Cordray’s instructions, for the organizations that hold the debt of defaulted borrowers.
Additionally, they will facilitate interactions with qualified borrowers reminding them of the steps they need to take to return to good standing. They will ensure that such borrowers do not suffer negative credit reports.
Read more: Paid Your Student Loan Debt? You May Get a Refund!
Student Loan Forgiveness Guidance
Borrowers in default will also need to take measures to get back in good standing, in addition to providing advice to the guaranty agencies. By accessing myeddebt.ed.gov or phoning the Default Resolution Group at 800-621-3115, they will need to submit a transfer request for their loans to Nelnet, a non-default student loan provider.
As Biden’s larger proposal to eliminate up to $20,000 in student debt for federal borrowers earning under $125,000 annually is still being challenged in court, this new guidance has been released.
The Supreme Court has already agreed to hear arguments in one of the lawsuits early next year, and two federal judges have already determined that the relief’s implementation should be stopped.
Millions of borrowers are waiting to see if the nation’s highest court will ultimately provide them the relief they were promised, despite the administration’s insistence that it will win in court.
Read more: Student Loan Forgiveness: Will Biden’s Plan be Implemented in February 2023?
