Education Department offers a second chance to 7.5 million borrowers who defaulted on student loans
The U.S. Department of Education is giving borrowers who've fallen behind on their student loans a chance to get into current standing.The U.S. Department of Education is giving federal student loan borrowers who've fallen behind on their debt a chance to get into current standing.initiative, the 7.5 million student loan borrowers who are in default will be able to return to repayment without a past-due balance.
Borrowers currently in default will have the opportunity to improve their credit records, shield themselves from any collection activity the government may be able to take against them — including wage garnishment — and restore their eligibility for federal student aid. It's not clear from the latest guidance exactly when borrowers can start taking steps for their fresh start, says Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.
"There will be borrower communications and the Education Department's website will be updated," Buchanan said, as to when borrowers can begin the process.Here's what borrowers need to know about the new program.Eligibility depends on the kind of loans you have, and at what point the loans defaulted. If you defaulted on any loans in the William D. Ford Federal Direct Program or the Federal Family Education Loan Program, you're likely to be eligible. Defaulted Perkins Loans held by the Education Dept. also qualify.Most federal student loan payments have been on pause since March 2020, when
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