Student Loan Forgiveness: Biden’s ‘Fresh Start’ Plan Deemed $34 Billion Success — How It Benefits Borrowers
President Biden’s Fresh Start program has placed $34 billion worth of delinquent or defaulted student loan accounts into “current” status.
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According to the New York Federal Reserve’s Q4 2022 Household Debt and Credit report, the initiative has resulted in less than 1% of all student debt being delinquent or in default.
Fresh Start Program Details
The Fresh Start program will run for one year after the COVID-19 payment pause ends (currently no later than June 30, 2023). As an eligible borrower, you can receive the following benefits:
- The ability to apply for federal student aid and other federal loans, such as mortgages (revoked when your student loans went into default)
- Relief from collection calls, wage garnishments, and Social Security and tax refund withholding
- The opportunity to rehabilitate student loans at a later date (normally, you only get one chance to do so)
- Access to income-driven repayment (IDR) plans, student loan forgiveness programs, deferment and forbearance
- Removal of the account default from your credit report
However, you must choose to participate in the program by making a repayment arrangement during the Fresh Start period. If you don’t, you’ll lose access to these perks.
Your loans must also be eligible for the program. Eligible loans include defaulted Direct Loans, Federal Family Education Loans (FFEL) and Perkins Loans held by the Department of Education.
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Strategically Prepare for Repayment
Unless all of your student debt gets forgiven, you’ll soon need to re-factor loan payments into your budget. But you don’t have to sacrifice fun to become debt-free. Instead, consider adding a “lifestyle” line item to your spending plan. Then, use those funds to cover coffee, takeout, event tickets and other discretionary purchases.
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