The Fresh Start program is poised to bring significant changes to the lives of those struggling with Student loan debt, promising to help them get back on track.
However, it’s important to understand that this program may introduce some volatility in credit scores, particularly in the initial months of implementation, as it reshapes the way student loan information is reported to credit bureaus.
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The impact on credit scores will vary, depending on several factors. One of the critical factors is the credit bureau from which the information is sourced.
Different bureaus consider various elements when calculating credit scores, leading to variations in the impact of the Fresh Start program. Additionally, a borrower’s credit history and the specific scoring system used can influence the degree of change in their credit score.
For most borrowers, the Fresh Start program is expected to yield positive results, resulting in increased credit scores as it takes effect. The program’s goal is to assist individuals in overcoming the challenges posed by defaulted student loans. However, it’s important to acknowledge that not everyone will see their scores rise; some may experience decreases.
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Boosting Credit Scores with the Fresh Start Program
According to Vantage Score, the key to achieving higher credit scores through the Fresh Start program lies in embracing its full benefits and ensuring that required payments are made promptly. Commitment to the program’s guidelines and consistent payment can ultimately lead to credit score improvements.
The Fresh Start initiative, effective February 2023, brings crucial changes to the way defaulted student loans are reported. Loans are no longer marked as in collection, and balances and balance-against-loan ratios have been adjusted. These adjustments aim to alleviate the financial burden on borrowers and offer them a fresh start.
To take full advantage of the Fresh Start program, borrowers must follow specific steps. Firstly, they need to register for the program through various avenues, including creating an account at myeddebt.ed.gov, contacting the Department of Education, or reaching out to the guaranty agency that holds their loan.
Exiting loan default is just the beginning. Enrolling in a Repayment Plan to reduce monthly payments and consistently making payments on time to avoid late payment charges are vital steps toward financial recovery and improved credit scores.
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