Act Now: Two Key Student Debt Relief Programs Expire Sept. 30

If you’ve been neglecting your federal student loan payments or have defaulted loans, time is running out to rectify the situation without severe repercussions. Two important pandemic-era relief programs are scheduled to expire on September 30: the student loan on-ramp and the Fresh Start program.

Many borrowers are benefiting from the on-ramp or Fresh Start – and some may not be aware of it. To check, log into your studentaid.gov account and review your monthly payment history and loan repayment statuses. If you have missed or late payments, you’re on the on-ramp. If you have a loan listed as in default, you’re benefiting from the Fresh Start program.

In either case, you need to take action by September 30. Here’s how.

The student loan on-ramp began on October 1, 2023, and will last until September 30, 2024. It’s designed as a safety net for the most vulnerable borrowers, as stated by the White House last summer.

The program automatically applies to all borrowers who miss payments during this period – there is no enrollment process. During the on-ramp, you cannot fall into delinquency or default. Missed payments will not be reported to credit bureaus.

Approximately 3 million borrowers have taken advantage of the on-ramp and were at least 30 days late on their loans as of June 30, according to Federal Student Aid office data.

If you’ve been skipping payments, make a plan for October. Otherwise, you could face severe and costly consequences. Once a payment is 270 days late, you will enter student loan default. Debt collectors can garnish your wages and impose significant fees.

Here are the steps to take before the on-ramp expires:

• Check your student loan accounts. Log into studentaid.gov, see how much you owe, and update your contact and billing information. Your servicer can address any questions.

• Choose a repayment plan. If you do not choose a repayment plan, you will automatically be enrolled in the standard 10-year repayment plan. For more manageable payments, consider an income-driven repayment (IDR) plan.

• Consider a deferment or forbearance. If you anticipate being unable to afford payments for the foreseeable future, think about a student loan deferment or forbearance to temporarily pause payments for up to three years.

If you wish to change repayment plans, note that only two IDR plans are currently available: SAVE and Income-Based Repayment (IBR).

If your federal student loans were in default before the pandemic, take advantage of the Fresh Start program. Approximately 7.5 million borrowers with defaulted loans are eligible.

You must enroll in the program by September 30 to exit default status and secure benefits, including:

• Loans returned to “current” status on credit reports, and negative default marks removed.

• Access to federal student aid and other government loans, such as mortgages.

• Access to flexible repayment plans and potential loan forgiveness.

• Access to short-term relief, such as deferment or forbearance.

• Suspension of involuntary debt collection efforts.

If you miss the September 30 deadline and allow your loans to remain in default, you could face serious consequences. Debt collectors may garnish your wages and tax refunds. You might incur high collections fees. Your credit score could drop significantly, making it challenging to qualify for future loans, mortgages, or even apartment rentals.

You can avoid this headache – and get back on track with an affordable repayment plan – by enrolling in the Fresh Start program. Here’s how:

• Submit a Fresh Start request. Enrolling in Fresh Start is free and can be completed in less than 10 minutes. You can do it online at myeddebt.ed.gov, over the phone by calling 1-800-621-3115, or by sending a letter postmarked by September 30.

• Watch for communication from your servicer. After enrolling in Fresh Start, the government will transfer your payments from the Default Resolution Group to a federal student loan servicer. Your new servicer will reach out to you once your loans have been transferred.

• Choose a repayment plan after exiting default status. You will be automatically placed on the standard 10-year repayment plan, but approximately 80% of Fresh Start participants opt for an IDR plan, according to the Education Department. Half of Fresh Start participants have $0 monthly payments under an IDR plan.