In March 2020, a pause was placed on the garnishments of Social Security benefits from beneficiaries who had defaulted on their federal student loan payments due to the COVID-19 pandemic. In April, however, the Trump Administration announced that these collections would resume again and up to 15% of a Social Security benefit could be garnished if the beneficiary was a loan defaulter.
Not too long after that, the Department of Education made a u-turn on this decision and announced that the pause on collections would be reinstated temporarily with collections set to resume again “sometime this summer”.
The federal government does have a bit of good news for those who fear having their monthly benefits garnished, however, and that is the Fresh Start initiative.
Here is what you need to know.
New federal initiative to help avoid Social Security garnishment
“In an environment where the cost of living remains stubbornly high, this kind of withholding from your income can pose real problems when trying to make ends meet, and force people into choosing between vital expenses,” said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York.
Federal student loan borrowers who are in default of their loan repayments have a once off, limited time chance to bypass having their Social Security benefits garnished when collections begin again later in the summer. Not only will this initiative help prevent Social Security garnishment, it will also get the borrower out of default and back into good standing.
The program is called the Fresh Start initiative and it is only available temporarily by the U.S. Department of Education. By enrolling to the Fresh Start initiative, a defaulted borrower will be able to return to good standing with regards to repayments, and prevent having their wages or benefits garnished through government collection activities. Additionally, through the Fresh Start initiative, the borrower will be able to rebuild their credit since the default status will be taken off their loan records, and they will now be eligible for an income-driven repayment (IDR) plan.
Borrowers in default should not delay enrolling to the Fresh Start program, particularly if they are recipients of Social Security as their July benefit could be garnished if no immediate action is taken. Fresh Start enrollment is free and should be available up until the end of 2025, at the very least. It should also be noted that private student loans do not qualify for Fresh Start, nor do loans that are currently in good standing.
How to enroll to Fresh Start
The Fresh Start enrollment process is fairly simple and the following individuals are encouraged to apply:
- Defaulters of federal student loans
- Social Security and SSDI recipients
- Those who have received a notice of garnishment
- Those who have not made a loan payment since the end of the federal pause
To enroll in Fresh Start, you should first log in or call in to Default Resolution Group. You will then need to provide your Social Security number, your FSA ID, and any available loan information. The system will then verify if you are eligible for the Fresh Start program and determine whether or not your loan is in default. If you are eligible, repayment plan options will be offered to you.
You can choose between an income driven repayment plan where you pay what you can each month, or a standard repayment with fixed terms. Once your preferred repayment plan is selected, you will agree to Fresh Start’s terms, then you will select a payment method, such as manual or direct debit. Following this, you will confirm your contact details and financial information.
Once you have submitted for authorization, you will return to good standing with regard to your loans and if you had any pending Social Security garnishments, they will be stopped.