Fresh Start program helping delinquent student loan borrowers end Sept. 30
HOUSTON - Time is quickly running out for programs to help delinquent student borrowers get back on track and wiped clean of defaults. The Fresh Start program and on-boarding period ends Sept. 30.
This week, 112 consumer advocacy groups wrote to the U.S. Department of Education, urging it to extend the programs.
Amy Czulada knows what it's like to have costly student loans.
"I currently have about six figures in student debt for my undergraduate and graduate degree," she said.
Czulada is one of millions of student loan borrowers in the SAVE income-driven repayment plan, whose loans were placed in a zero-interest forbearance while courts consider challenges to the program, creating uncertainty among many borrowers.
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"They don’t know if they should be making payments right now or accepting the forbearance," she said.
Czulada also works with the Student Borrower Protection Center, which is one of 112 labor, consumer advocacy, and civil rights groups that submitted a letter to the U.S. Department of Education, saying those in the SAVE plan should have their time in forbearance count toward the total months of payments required for loan forgiveness.
"It’s great that borrowers were put into forbearance. But forbearance doesn't count for things like Public Service Loan Forgiveness and income-driven repayment that would offer cancelation after different periods of time," said Czulada.
The letter also calls for the extension of the Fresh Start program, which allows delinquent borrowers to resume payments and have defaults erased, and the on-boarding period, when delinquent payments are not reported to collections or credit bureaus, beyond their Sept. 30 cutoff.
"Our fear is that default rates could continue to rise," said Czulada.
Debt relief attorney Leslie Tayne says delinquent borrowers should contact their loan servicers about repayment options or to join the Fresh Start program before it ends.
"They should ask about their options. Forbearance could also be an option for you that allows you to hold off making any payments, although interest will still accumulate generally during a forbearance program," explained Tayne.
If payments are not received for 90 days after onboarding ends, debts can be sent to collections.
"That would have a negative impact on your credit score and your ability to borrow, refinance, or even rent, and obtain certain licenses and jobs," said Tayne.
Borrowers should also make sure their student loan servicers have their current address and contact information so that they're receiving information about their loans and options.
They can also contact a debt attorney or credit counselor for help.
The Federal Government can withhold federal and state tax refunds for borrowers in default, but it can no longer garnish wages.