program to restart their repayments.
The federal program is a one-time, temporary program that resets borrowers loans. The program also allows borrowers to enroll in income-driven repayment plans which limits the amount of their income that can be used to pay back student loans, hence lowering their monthly payments.
And so although folks are going to have these loan payments start up again, there are programs, particularly for those that were way behind and having financial issues to get them in essence caught up and allow them to start over again fresh, said William Chittenden, a professor of finance at Texas State University.
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To use the Fresh Start program to get out of default, borrowers must first contact their loan holder, according to the Department of Education.
Borrowers whose loans are held by the Department of Education can contact the department online, by phone or by mail.
Once borrowers utilize the Fresh Start program to exit default, their defaulted loans will be transferred to a loan servicer. The defaulted loans will transition into repayment status, and the borrowers credit report will no longer contain any record of the defaulted loans.
When borrowers get out of default, they will be expected to choose a payment plan to repay their loans. Most borrowers choose an income-driven repayment plan.
How to apply to Fresh Start to repay student loan debt