Biden-Harris Administration Opens New Path for Incarcerated Borrowers to Exit Default

Biden-Harris Administration Opens New Path for Incarcerated Borrowers to Exit Default

April 16, 2024

The U.S. Department of Education (Department) today announced a new path for borrowers who are incarcerated to exit default through consolidation, providing them access to improve their credit and better repayment options than ever before. Borrowers who had student loans before becoming incarcerated can now consolidate their loans to get out of default, providing them with certain types of loans—including Perkins Loans and commercially held Federal Family Education Loan Program (FFEL) loans—to gain access to income-driven repayment (IDR) plans like the Saving on a Valuable Education (SAVE) Plan. Borrowers who are incarcerated can still sign up for Fresh Start until Sept. 30, 2024, as an additional option to exit default. Previously, this population of borrowers would have to rehabilitate their loans to get out of default rather than having the option to consolidate.

The Department has already taken several actions to support students and borrowers who are incarcerated, helping them forge new beginnings. This includes implementing new Prison Education Program (PEP) regulations in July 2023. While Second Chance Pell allowed more than 40,000 students to receive Pell grants, this mass expansion of federal financial aid will allow a far greater number of students to access federal Pell grants. PEPs allow students to continue their education and receive access to Pell grants and federal student loans while incarcerated, building off the Second Chance Pell Experimental Sites Initiative started during the Obama-Biden Administration. Through expanded access to Pell grants through PEPs, the Department has the potential to reach more than 760,000 incarcerated individuals. The Department anticipates approving at least 50 PEPs by 2025.Through partnerships with the U.S. Department of Justice’s Bureau of Justice Assistance and the Federal Bureau of Prisons, as well as the Vera Institute of Justice, 47 states, the Bureau of Prisons, and Puerto Rico are prepared to accept applications for PEPs. 

As part of today’s announcement, and in celebration of Second Chance Month, U.S. Secretary of Education Miguel Cardona visited a Second Chance Pell program at Cheshire Correctional Institution in Cheshire, Connecticut to highlight the Department’s efforts to provide access to educational programs for people who are incarcerated and enabling a jump start.

“Every person deserves the opportunity to become the best version of themselves, but too many individuals who are incarcerated never get that opportunity,” said U.S. Secretary of Education Miguel Cardona. “By increasing access to repayment options for student loan borrowers who are incarcerated, the Department of Education is taking one important step to help them to reclaim their lives and rewrite their own narratives.”

Borrowers who had student loans before becoming incarcerated can consolidate their loans by contacting their student loan servicer, as long as they are not students (such as enrolled in a PEP or SCP program) when they consolidate. The Department encourages borrowers with loans in default to consider signing up for Fresh Start, the Department’s temporary program that helps borrowers get out of default and automatically receive the benefits of returning to a current repayment status. The deadline to enroll in Fresh Start is Sept. 30, 2024. Borrowers who remain in default may be unable to receive certain relief measures and may be subject to financial consequences, which can be severe and long lasting. 

Prior to today’s announcement, borrowers who are incarcerated with loans other than Direct Loans had limited options to get out of default. Now, these borrowers will have an easier path to get out of default—stopping harmful credit reporting and improving future financial prospects—and return to repayment status during their incarceration. The Biden-Harris Administration is committed to empowering individuals who are incarcerated to have a second chance and making federal student loans more affordable for everyone.  

Borrowers can learn more about loan consolidation on Borrowers can learn more about Fresh Start at and about the SAVE Plan at