September 27, 2024
If you have a federal student loan you may be benefitting from a program that you didn’t even know about. But on Monday – that program is ending and you may find yourself in a situation you were not prepared for.
So let me back up and explain what’s happening.
You remember for a few years during the pandemic federal student loan payments stopped because of government issued forbearance. When those payments restarted in October of 2023, President Biden was like – let’s give folks some grace when it comes to restarting those payments again. Back in June of 2023 he ordered the Department of Education to create what’s called the “on-ramp” program and the “fresh start” program.
The on-ramp program said financially vulnerable borrowers who miss monthly student loan payments would not be considered delinquent, the missed payments would not be reported to the credit bureaus, your accounts would not be place in default and you would not be referred to debt collection agencies. Borrowers still had to pay, but during the on-ramp period borrowers wouldn’t face those negative consequences if they missed a payment or were late on a payment.
The fresh start program helped borrowers who had certain types of federal loans and were in already default, get back into good standing with their loan servicer so all the negative consequences of that default could be removed from their credit scores, financial history and collections.
Well – both the on-ramp program and the fresh start program are ending on Monday September 30th.
So what does that mean for you? Well, that means you need to start repaying your federal student loans, and repay them on time. Because if you miss payments or if you are more than 90 days late on a payment you could wind up in default could face the full force of the federal government’s collection powers, including garnishing your wages, tax refunds and social security benefits.
Read more about the on ramp program here.
Read more about the Fresh Start program here.
