Student Loan On-Ramp Ending: Will Default Rates Surge?

The student loan on-ramp program is set to end on September 30, 2024. This marks 12 months since repayments resumed after the Covid-19 pause. 

The student loan on-ramp was marked by several key features designed to protect borrowers who may be struggling to get back on track financially after the pandemic. These programs included not reporting late or missed payments to the credit bureaus, keeping student loan collections paused (including wage garnishments and tax offsets), and allowing borrowers to get back on track with the Fresh Start Program.

These protections all end in September 2024, a period which is mired in chaos for borrowers as lawsuits are blocking key income-driven repayment plans and loan forgiveness programs.

Fresh Start Initiative

The end of the student loan on-ramp program is closely tied to the expiration of the “Fresh Start” initiative, another relief effort launched by the Biden administration. 

Fresh Start has provided borrowers already in default with significant protections, including shielding them from collections and offering them a way to return to good standing. According to the Department of Education, roughly 7.5 million borrowers were in delinquency or default at the start of the pandemic. 

To qualify for Fresh Start, borrowers need to contact their loan servicer and start the process of rehabilitating their loans.

As Fresh Start also sunsets on September 30, defaulted borrowers could once again face aggressive collection tactics from the federal government, including wage garnishment and the seizure of tax refunds or Social Security benefits.

Student Loan Uncertainty

The end of the student loan on-ramp period comes as other student loan relief efforts remain in legal limbo. The Biden Administration’s SAVE plan, which offers lower monthly payments and pathways to forgiveness, has been blocked by legal challenges from Republican-led states.

The result of these legal challenges has paused loan forgiveness, loan consolidation, and income-driven repayment plan applications.

Advocacy groups have urged the administration to extend the on-ramp program or pause student loan payments entirely, given the ongoing chaos in the student loan system.

So far, the administration has given no indication that it plans to extend the payment on-ramp or Fresh Start programs.

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