What Is the Fresh Start Transfer for Student Loans?

The Fresh Start transfer for student loans was a one-time U.S. Department of Education program that moved defaulted federal loans out of the Default Resolution Group and over to a regular loan servicer, ending default status without the payment history that rehabilitation requires or the new loan that consolidation creates. It closed to new enrollments at 2:59 a.m. Eastern time on October 2, 2024.¹ If your loans are still in default today, the program is no longer an option, but rehabilitation and consolidation are.

What the Transfer Actually Did

When a borrower enrolled, the Department transferred the defaulted loan from the Default Resolution Group (or from a guaranty agency, for certain FFEL loans) to a standard federal servicer such as Nelnet, MOHELA, or Aidvantage. The transfer took four to six weeks for most borrowers. Once it completed, the loan showed as “in repayment,” and the borrower regained access to federal student aid and to income-driven repayment plans.¹

Fresh Start covered defaulted Direct Loans, FFEL Program loans (including those held by guaranty agencies), and Perkins Loans held by the Department. It did not cover Perkins Loans still held by schools, HEAL Program loans, or any loan tied up in active Department of Justice litigation. The default had to predate the end of the COVID-19 payment pause; loans that defaulted after the pause ended were not eligible.¹

One point matters for anyone who used the program: Fresh Start did not consume the one-time rehabilitation option federal law allows each borrower. If you completed Fresh Start and later default again, you can still rehabilitate that loan once.¹

What Borrowers Got From It

The credit cleanup was the most tangible benefit. When loans moved to a non-default servicer, the Department reported them as current rather than in collection. Loans that had been delinquent for more than seven years were deleted from credit reports entirely. And as of July 10, 2022, the Department removed default notations from CAIVRS, the federal system used to screen applicants for FHA mortgages and other federal credit programs.

There is a caveat. If a borrower who used Fresh Start defaults again, the loan gets reported using the original date of delinquency; the seven-year clock does not reset.² A second default can show up as a long-standing delinquency rather than a new event.

During the enrollment window, the Department also paused involuntary collections on eligible loans: wage garnishment, seizure of tax refunds and Social Security through the Treasury Offset Program, DOJ referrals, and collection fees.² Those protections have expired. The Treasury Offset Program restarted on May 5, 2025, and administrative wage garnishment notices resumed later that summer.³

If You Completed Fresh Start but Never Picked a Plan

Getting out of default was only half the process. Borrowers who did not actively choose a repayment plan with the new servicer were placed on the Standard Repayment Plan, which divides the balance into fixed monthly payments over ten years.¹ For many borrowers coming out of long-term default, that payment is too high to sustain.

About 80% of Fresh Start enrollees chose an income-driven repayment plan instead, which can drop monthly payments to as little as $0 depending on income and family size.¹ If you completed the transfer, ended up on Standard, and can’t keep up, call your servicer and apply for an income-driven plan before you fall behind. Your servicer may place the account in forbearance while the application is processed.⁴ Not sure who your servicer is? Log into your StudentAid.gov dashboard or call the Federal Student Aid Information Center at 1-800-433-3243.⁵

If You Missed the Deadline

Two paths remain for getting a defaulted federal loan back in good standing: rehabilitation and consolidation. They work differently and produce different credit outcomes.

Rehabilitation

Rehabilitation requires nine on-time, voluntary monthly payments within ten consecutive months. You can miss one month and still qualify, except with Perkins Loans, which require nine consecutive payments with no gap. The payment amount is set at 15% of your annual discretionary income divided by 12. If that figure is unaffordable, you can submit an income-and-expense form to the loan holder and request a lower amount.⁶

Rehabilitation is the only route that removes the default notation from your credit history entirely. Late-payment records can still appear for up to seven years, but the default itself is deleted. The tradeoff is time: roughly a year from start to finish, and collections can continue until you complete the required payments.

To start, call the Default Resolution Group at 1-800-621-3115 (TTY: 1-877-825-9923) or write to P.O. Box 5609, Greenville, TX 75403-5609. You’ll need your most recent tax transcript or a hand-signed copy of your Form 1040. The Department mails a rehabilitation agreement letter within 10 business days.⁶

Direct Consolidation

Consolidation creates a new Direct Consolidation Loan that pays off the defaulted loans. The new loan starts in good standing, which ends default collections immediately and restores eligibility for federal aid and repayment plans. To consolidate a defaulted loan, you must either agree to repay the new loan under an income-driven plan (submitting the IDR application with the consolidation application) or make three consecutive, voluntary, on-time monthly payments on the defaulted loan first.

Consolidation is faster than rehabilitation. The downside: the default notation stays on your credit report for up to seven years from the original date, and you lose the ability to rehabilitate that specific loan later, because rehabilitation only applies to existing loans and the consolidation replaces them. If active garnishment or a tax refund seizure is bearing down on you, consolidation is usually the faster stop. If you can afford the longer timeline and want the cleaner credit outcome, rehabilitation is worth it.

Avoiding a Second Default

For Direct Loans and FFEL Program loans, default kicks in after 270 days of missed payments. The consequences include wage garnishment, seizure of tax refunds and Social Security benefits, loss of federal student aid eligibility, collection fees added to your balance, and potential lawsuits.⁷

If you’re struggling to pay, contact your servicer before you miss a payment. Deferment, forbearance, and IDR adjustments are all available while a loan is in good standing. They disappear once you default.

Free Help, and What to Avoid

Every step in this article is free. The Department of Education does not charge to enroll in rehabilitation, process a consolidation application, or switch repayment plans. Third-party companies that offer to handle your student loan paperwork for a fee, sometimes thousands of dollars, are doing nothing you cannot do yourself with a phone call to the Default Resolution Group or your loan servicer. Some collect payment and never follow through, leaving borrowers deeper in default than when they started. If anyone asks you to pay for help getting out of federal student loan default, walk away.

1
Federal Student Aid. A Fresh Start for Federal Student Loan Borrowers in Default
2
Federal Student Aid. A Fresh Start for Borrowers with Federal Student Loans in Default
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U.S. Department of Education. U.S. Department of Education to Begin Federal Student Loan Collections, Other Actions Help Borrowers Get Back to Repayment
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Federal Student Aid. Income-Driven Repayment Plans
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Federal Student Aid. Who’s My Student Loan Servicer
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Federal Student Aid. Student Loan Rehabilitation for Borrowers in Default – FAQs
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Federal Student Aid. Student Loan Delinquency and Default