If you have loans that are in default, you won’t be eligible for Income-Driven Repayment Plans or loan forgiveness programs. While the quickest way to get out of default is by repaying the defaulted loan in full, this is often not a realistic option for most borrowers. If you have federal student loans in default, the new Fresh Start Program may be a good option for you. Learn more about this program below. You can become eligible for Income-Driven Repayment Plans or loan forgiveness programs once your loans are out of default.
If you have loans in default, we encourage you to contact the Savi team to talk through your options. To get started with the Savi team, log in to your account and click “Contact an Expert”. If you are in default, you won’t be able to see options for repayment plans or eligibility for forgiveness in the Savi tool. However, Savi can help you understand your options for a defaulted loan through programs like the loan rehabilitation process. With Savi’s help, you can contact your servicer to start the loan rehabilitation process - we’ll be here every step of the way!
The loan rehabilitation program is designed to help borrowers remove their loan from default and have their loan be in good standing. One of the biggest benefits of rehabilitation is that your defaulted loan would be removed from your credit report.
To rehabilitate your loan, you’ll work with your loan holder to make nine payments for ten consecutive months. The payment amount will be set by your loan holder, but the amount will be something that is reasonable and affordable. Note, you will only be able to take advantage of the loan rehabilitation program one time.
Once your loan is rehabilitated, the default status will be removed from your loan, and collection of payments through wage garnishment or Treasury offset will stop. You’ll regain eligibility for benefits that were available on the loan before you defaulted, such as deferment, forbearance, a choice of repayment plans, and loan forgiveness, and you’ll be eligible to receive federal student aid. Additionally, you can pick up your progress in the Savi tool and complete your application(s) for loan forgiveness programs or repayment plans.
Fresh Start Program:
The Department of Education announced a new program for borrowers whose loans are in default. The Fresh Start program will help restore your credit report, end collections, and allow you to be eligible to enroll in repayment plans and apply for forgiveness.
If you have a defaulted Direct loan, defaulted Federal Family Education Loan (FFEL), or defaulted Perkins loan that is held by the Department of Education, you will be eligible for the Fresh Start program. If you’re not sure what type of loan you have, you can call the Default Resolution Group at 1-800-621-3115.
Savi will update this article as more details about the Fresh Start program are available in 2023.
If your loan is in default and you’d like to understand your options or work directly with the Savi team, log in to your account and click “Contact an Expert” to schedule time with our team.