The Biden administration has crafted a plan that would bring millions of borrowers who defaulted on federal student loans back into good standing, The Washington Post is reporting.
The plan, aimed at 7.5 million borrowers who took out certain types of federal loans and defaulted on them, would restore their eligibility for financial aid and remove the default from their credit history, according to documents obtained by the Post.
The plan would affect borrowers who defaulted on federal loans made directly by the Department of Education, Perkins loans held by the department and bank-based loans held by the department or private companies.
If a person defaults on federal student loan payments, they become ineligible for other loans and grants. Under this proposed program, their eligibility for federal Pell grants, work-study aid and loans will be reinstated, according to a fact sheet that the Post obtained.
On Wednesday, the DOE said it was moving to implement the policy, called the Fresh Start program, ahead of the fall semester.
“The consequences of default are so punitive, it’s as if whoever designed these policies assumed that borrowers were somehow trying to beat the system,” Undersecretary of Education James Kvaal said.
“By and large, borrowers who default on their loans are people who have been failed by the policies and lagging investments in college affordability.”
The program does not forgive the loan, but allows borrowers with federal student loans in default to reenter current repayment status.