"A really big piece here is just awareness, just getting the word out," says Brian Denten, with The Pew Charitable Trusts' Student Loan Initiative. Many do not have updated contact information on file and may have little interest in returning to repayment. "But obviously, we have a long way to go."Įxperts warn, historically, borrowers in default have been the hardest to reach. "I'm very happy that those folks have been able to take advantage of this opportunity," says Biden's under secretary of education, James Kvaal. "It was easy!" Moreno wrote in an email to NPR after finishing the online application.Īccording to the Education Department, more than 300,000 borrowers have already opted into the program, though that's a small fraction of the borrowers languishing in default. ![]() Getting the word out to defaulted borrowers won't be easy That's why, a few weeks ago, Juan Carlos Moreno went online to enroll in Fresh Start. For these borrowers, being in good standing, and even earning their way toward loan forgiveness, costs less than being in default. According to newly released federal data, 2.9 million borrowers who are enrolled in SAVE earned incomes low enough that they qualified for a $0 monthly payment. When opting into Fresh Start, many borrowers can now enroll in the newest, most generous plan, known as SAVE, which offers lower payments and loan forgiveness after a set number of years.įor many low-income borrowers, SAVE could be a game-changer. Perhaps most importantly, in the past, borrowers emerging from default could not immediately qualify for the most flexible, income-driven repayment plan, but the Biden administration has changed that too. The Student Loan Restart Student loan forgiveness is on the way for more than 800,000 borrowersĪfter enrolling, borrowers will be able to qualify, once again, for federal financial aid – an important benefit to help the nearly half who attended college but did not complete a degree. If borrowers in default want to keep these benefits, they have through September 2024 to opt into Fresh Start – the simplest path yet out of default. The problem is this is a temporary reprieve. Many borrowers' credit reports have also improved, with defaulted federal loans now reported as "current" instead of "in collections." Social Security payments aren't being withheld. Wages and tax refunds aren't being garnished. As part of Fresh Start, the Biden administration has extended the pandemic-driven pause on collections on defaulted loans until at least September 2024. Right now, borrowers with federal student loans in default are already feeling relief without having to do a thing. possible, because of this new program promising a reset. He lived with that fear for years, until recently, when the impossible math of repaying his loans seemed suddenly. "Almost every month, coming around to payday time, I was so worried I was going to see the wrong figure on my check, on my direct deposit," Moreno says. Though Moreno never had his wages garnished, he knew it could happen. Any tax refunds, like the EITC, which is incredibly important for low-income people, can be garnished." ![]() If they're receiving Social Security, that can be garnished. "Consequences that ripple throughout people's lives," says Jackson of The Education Trust. The Student Loan Restart Education Department punishes student loan servicer for billing mistakes Moreno stopped paying his federal loans, and eventually they fell into default. "It may sound irresponsible, but I had heard other people saying the same thing: 'I just can't do it, so I'm not doing it.' And it was terrifying to. After the Great Recession, they lost their home and, in late 2011, filed for bankruptcy. Moreno didn't want to default on his student loans, but his family was in crisis. ![]() We need to have health care." But after paying for those priorities, he says, there simply wasn't enough money left over to pay his monthly federal student loan bill. We need to have four walls," he remembers thinking. Juan Carlos Moreno remembers the impossible math of his own default in 2015. Americans with incomes below twice the federal poverty line account for 65% of defaulted borrowers according to the Institute for College Access & Success. The common denominator, though, is poverty. It may sound irresponsible, but I had heard other people saying the same thing: 'I just can't do it, so I'm not doing it.' And it was terrifying to.
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