The U.S. Department of Education has announced a significant increase in the Fresh Start discount for federal student loan borrowers in default. As of June 2026, the discount has been quadrupled, reducing collection costs from 16% to 4% of the outstanding balance for those who enter the Fresh Start program before the deadline.
Fresh Start is a temporary program that allows borrowers with defaulted federal student loans to regain access to repayment plans, loan forgiveness, and other benefits. The discount applies to collection fees, which are typically added to the loan balance when a borrower defaults. The Department of Education confirmed this change on its official website, effective for borrowers who enroll by September 30, 2026.
Borrowers must act quickly to take advantage of the reduced fees. The program is available to all borrowers with defaulted Direct Loans or Federal Family Education Loans (FFEL) held by the Department. After the deadline, collection costs will revert to the standard rate.
To enroll, borrowers can contact their loan servicer or visit the Department of Education's Fresh Start portal. The program also offers flexible repayment options and the removal of default status from credit reports, providing a path to financial recovery.
