The Biden administration initiated the Fresh Start program to help federal student loan borrowers exit default without the standard rehabilitation process (nine on-time voluntary monthly payments) or the consolidation process (an agreement to repay under an income-driven plan or to make three full on-time monthly payments). This “opt-in” benefit of Fresh Start was offered to borrowers of most federal loans in default starting in spring 2022. In winter 2022, the US Department of Education took a second step, providing an “automatic” benefit. Most federal student loan borrowers with credit-reportable defaulted loans were automatically reported to credit agencies as “current” until the end of the program in fall 2024.

Why This Matters

There is relatively little research about how the Fresh Start program affected defaulted borrowers. Understanding outcomes for borrowers who opted in to Fresh Start, or who received the automatic benefit of having their default made current on their credit record, can help us understand the credit impacts of default and the likelihood of maintaining good standing after exiting default through this new pathway.

Key Takeaways

Because of limitations in the credit panel, I can produce information only for borrowers who recently defaulted (between August 2018 and August 2020). Among my sample of borrowers who appear to have defaulted just before the pandemic,

• about 15 percent appear to have opted in to Fresh Start or otherwise returned their student loans to good standing by August 2025,
• about 52 percent of “opt-in” Fresh Start borrowers who were in active loan repayment were at least 90 days delinquent by August 2025 (this rate is higher than the 28 percent delinquency rate for all borrowers in active repayment in the same period), and
• borrowers whose loans were automatically returned to default on their credit record by August 2025 experienced an average credit score decrease of about 31 points and an average balance increase of about 5 percent.

How I Did It

To look at credit reporting for borrowers who are subject to Fresh Start, I use a random 2 percent national sample of consumers with a credit record from one of the three major credit bureaus. I initially restrict my sample to all student loan borrowers with at least one student loan on their credit record at any point between 2015 and 2025. Because student loan defaults typically drop off a credit record after seven years if the borrower does not cure their default through consolidation or rehabilitation, I cannot identify all defaulted borrowers who are eligible for Fresh Start. Instead, I focus on small group of borrowers who were still within seven years of their default by August 2025.