Student Loan Fresh Start: The Fresh Start program, which helped over 7.5 million borrowers with defaulted student loans, has raised questions about its impact on credit reports. When you enroll in this program, your loans no longer appear as “in default,” which is a significant improvement for your credit report.
This means that any negative marks related to the default status are removed, and your credit score may improve as a result. However, if your loans have been in default for a long time, there could still be some lingering effects on your credit from missed payments, even though they won’t show as defaults anymore.
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The program offered benefits such as the chance to join an income-driven repayment plan or reduce monthly payments to as low as $0. In some cases, borrowers could also become eligible for student loan forgiveness programs.
While these benefits can help borrowers catch up on their loans, the long-term effects on credit scores will vary based on how long someone was in default and their repayment history before enrolling in the program.
Student Loan Fresh Start: What will happen to your credit report?
👋 Calling all May grads. Did you know your grace period may be ending soon? ​
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You can breathe more comfortably now. Instead of negatively impacting your credit report, enrolling in Fresh Start will raise your credit rate and all the associated perks.
In the event that you enrolled, the Department of Education will change your loan status from “in default” to “in repayment” or from “in collection” to “current.” The negative marks will be removed from your credit report as a result of this modification.
In certain instances, this enables borrowers to improve their credit score, which opens up more favorable terms and reduced interest rates on other loans.
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What other benefits does Fresh Start offer?
Enrolling in the Fresh Start program helps prevent the government from garnishing wages or withholding tax returns, child tax credits, or Social Security payments. To maintain these benefits, it’s important to stay current on loan payments.
If payments aren’t made, garnishments or withholding could resume. Staying disciplined with payments helps protect your financial health.
