Attention student loan borrowers: time is running out! Two vital COVID-era debt relief programs are set to end on September 30, so we must act now.
The student loan “on-ramp” initiative was launched during the pandemic to help borrowers with missed payments or defaults by preventing negative credit reporting and collection actions.
Another program, Fresh Start, will also wrap up this month. This program allows borrowers in default to regain good standing with just a phone call. According to the Department of Education, about half the borrowers eligible for Fresh Start can make $0 payments, and 60% pay $50 or less.
“Many borrowers remain unaware of Fresh Start because the on-ramp program buffered them from the impacts of default,” explained Lux. “Once this opportunity vanishes, those in default will face less appealing alternatives like loan rehabilitation or consolidation, both of which come with notable downsides.”
It’s essential for interested borrowers to confirm their eligibility and take action quickly. Lux emphasized the importance of this opportunity for potential savings, credit score improvement, and even loan forgiveness.
Those who benefited from the pandemic payment pause automatically received the on-ramp protection. However, once this period ends, negative credit reports, collection calls, and wage garnishments will resume.
“Taking action before October 1 is crucial to prevent these issues,” Lux stressed.
While the lawsuit challenging President Biden’s SAVE repayment plans complicates matters, borrowers can still apply for income-driven repayment plans through paper applications to their loan servicers.
“For those interested in the SAVE plan, they can enter an interest-free forbearance while the lawsuit is active,” Lux highlighted. “Though this won’t count toward forgiveness, it’s a manageable way for borrowers to ease back into repaying their loans without impacting their credit or income.”
The legal challenge, spearheaded by Missouri and other Republican-led states, accuses the Biden administration of unlawfully attempting to cancel large amounts of student debt.
“The Biden-Harris Administration is attempting to burden working Americans with Ivy League debt unlawfully,” stated Missouri Attorney General Andrew Bailey.
Despite the challenges posed by both the lawsuit and the ending of the COVID relief programs, there remains a chance to benefit from Fresh Start.
Financial expert Ryan recommends that borrowers check their loan status at studentaid.gov and choose a repayment plan that fits their budget.
Setting up autopay can also help borrowers maintain their accounts and avoid default.
“Ignoring the situation won’t improve it,” Ryan cautioned. “In fact, missing payments can severely hurt your credit score, making future loans harder to secure.”
“Face your challenges head-on, even if it feels intimidating,” he advised.