South Florida Sun-Sentinel (Sunday)
A fresh start for struggling student loan borrowers
The sixth and latest extension of the moratorium on federal student loan repayments includes a new plan to help borrowers get a fresh start.
It’s called, aptly enough, the “Fresh Start” program, and it’s estimated that 10 million borrowers could benefit from this provision that will be in place at least through Aug. 31.
When federal loan repayments resume in four months, borrowers whose loans were delinquent or in default before the pandemic in early 2020 will be automatically returned to good standing, and will have the delinquencies and defaults purged from their credit history.
That’s a huge break, since defaults can lead to all kinds of negative credit consequences.
The Department of Education said it will implement the fresh start process during the moratorium extension.
What else can borrowers do between now and Aug. 31? The same advice still applies. Among the recommendations from student loan experts:
Make sure your contact information is up to date with the loan servicing company.
If you haven’t already, sign up for the government’s Auto Pay program, which automatically transfers your loan payments from your bank account to your loan servicer so you avoid missing payments.
If the standard repayment amount on your loans is too high for your budget, NerdWallet recommends enrolling in an income-driven repayment plan, where the loan payment is based on your income instead of the amount of debt.
If you’re still struggling financially once payments resume, ask your servicing company about an unemployment deferment, an economic hardship deferment and general forbearances.
Don’t pay a fee to anybody offering to fix your student loan problem, and don’t share your federal student aid identification number.
Finally, if you’re wondering how much longer the student loan moratorium will remain in place, the short answer is quite some time.
Technically, as soon as President Joe Biden rescinds a national emergency declaration, the legal authority for the payment pause and interest waiver ends, said Mark Kantrowitz, a student loan expert and author of “How to Appeal for More College Financial Aid.”
That said, it’s highly likely that there will be a seventh extension this fall that will carry through the November mid-term congressional elections. The president would surely be under political pressure not to restart repayments two months before elections.
Perhaps baseball hall of famer Yogi Berra put it best: It ain’t over ‘til it’s over.
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