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Student Debt Forgiveness: Biden’s $34 Billion “Fresh Start” Plan Benefits Borrowers

According to new statistics from the Federal Reserve Bank of New York, the percentage of student debt in default decreased by three percentage points between the third and fourth quarters of 2022. This Article contains Student Debt Forgiveness, read more!

In order to put that into context, the Fed reports that $34 billion in defaulted student debt were designated current at the end of 2022.

Student Debt Forgiveness: Biden's $34 Billion "Fresh Start" Plan Benefits Borrowers

In two cases challenging President Joe Biden’s student loan relief initiative, the Supreme Court heard oral arguments on Tuesday. Several conservative justices seemed to question the government’s authority to forgive millions of dollars in nationally held loans. (Photo:

The “Fresh Start” program of President Joe Biden, rather than a sudden influx of borrowers refinancing their student debt, was what caused the shift. The program, which was unveiled in April of last year, aims to give troubled borrowers a chance to manage their debts more effectively.

The effort will give borrowers a chance to seek relief that might have prevented them from going into default in the first place, even though it won’t necessarily alter the balances or payments on previously defaulted loans.

Here is the operation of the Fresh Start initiative and how borrowers can benefit.

A simpler route to payback student debt

Your loans revert to “current” status once you enlist in the Fresh Start program, giving you access to student debt forgiveness and repayment options. Since the Fresh Start doesn’t qualify as a rehabilitation and the default will be erased from your credit report, you will still be able to rehabilitate your loans even if you default on them again.

Since they cannot manage their monthly payments, student loan borrowers frequently default on their loans. However, the Biden administration has emphasized that by reducing those to as little as $0 through income-driven repayment plans, many borrowers could have escaped default. They are given another opportunity to do so with the Fresh Start.

The administration claimed that 7.5 million borrowers, many of whom were Pell Grant recipients or first-generation college students, stood to gain from the initiative when it was revealed last spring.

However, the New Start is not a given. To find out if their loans are eligible and to enlist in the program, borrowers can go to or dial 1-800-621-3115. According to a Department of Education fact sheet, the majority of borrowers will be forced to make long-term payment arrangements.

What occurs to student debts that are in arrears?

Federal student debts typically enter default when a borrower skips more than 270 days of payments. Defaulting on your loans can have a number of severe repercussions, according to ED, including the immediate payment of the entire balance of your debt, the reporting of your default to credit bureaus, which can seriously harm your credit score, and the possibility of having your wages withheld.

Wage garnishments and some of these other actions were stopped during the pandemic payment pause, but the pause is set to expire on or around June 30. In order to escape these consequences, borrowers with loans in default have one year from the end of the payment pause to sign up for the Fresh Start program.

Prior to Fresh Start, if you fell behind on your student loans, you could either make a complete payment or get out of default by consolidating your loans or getting them rehabilitated. Both choices enable debtors to qualify for advantages like deferment, forbearance, or loan repayment plans.

According to ED, rehabilitation requires more time than consolidation but eliminates the default from your credit records. Unless they already did so during the pandemic payment pause, borrowers are only permitted to refinance their debts once.

To exit default more quickly, you can combine your debts into a single Direct Consolidation Loan, but the default will remain on your credit report. The advantage of consolidating through ED is that it’s free and can make your payments easier by assigning you a single loan servicer, monthly payment, and interest rate.

The principal balance of your freshly consolidated credit will be increased by the amount of any unpaid interest on your prior loans. The weighted average of the interest rates on the prior debts will serve as your interest rate.

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