Collection activities are currently paused for all federal student loans through September 2024, which should protect your 2022 and 2023 federal and state tax refunds.
While the payment pause is ending at the end of August 2023, the Department of Education has stated that tax refund offsets will continue to be paused until at least six months after the payment pause ends.
Administrative Wage Garnishments Temporarily Paused
The payment pause is ending at the end of August 2023, but the Department of Education has stated that collections on loans that are eligible for the new Fresh Start program will continue to be paused during the Fresh Start period.
(updated December 22, 2023) All or part of your refund may be offset to pay off past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or other federal nontax debts, such as student loans.
You should receive notice if your refund is going to be offset. If you haven't received notice, contact your student loan provider to determine if they intend to offset your refund. If you deposit this check in your bank account, it's possible for private creditors to levy this money.
If you default on a federal student loan, the government can take your tax refunds to help cover what you owe. However, the government has paused this program and other collection activities.
It's possible to receive a tax refund if you have student loans. Simply owing money on loans does not prevent you from getting a refund — defaulting on those loans does.
Tax Refund Offset
The debtor is notified in advance of any offset action to be taken. Individuals may call the TOP Interactive Voice Response (IVR) at 800-304-3107 to determine the contact information for the agency or state they owe.
US News & World Report in an article titled “When To Worry If Your Tax Refund Is Delayed” gives several reasons why you could be experiencing tax refund delays in 2023. Return Errors – A return can be held up because of simple math mistakes, forgetting to sign, incomplete forms, incorrect SSN, etc.
You generally cannot stop a tax refund offset. The IRS service center processing the return will likely not honor the request. However, the documentation submitted with the tax return can help with other interactions with the IRS. This first option presupposes that the taxpayer knows of their Federal or other debt.
Borrowers should generally avoid putting their loans on default, or being 270 days past payment, to avoid seeing their tax refund garnished. However, the Biden Administration's 12-month on-ramp to repayment program currently prevents borrowers from facing a penalty if they don't make loan payments through Sep. 30 2024.
In most cases, the borrower no longer had any outstanding student loan reported on their credit record in February 2023, suggesting the loan may have been paid off, discharged, or aged off the borrower's credit record.
The average student loan debt borrowed for a four-year bachelor's degree was $30,500 in 2019-2020, according to the National Center for Education Statistics (NCES). The average federal student loan debt has more than doubled since 2007, from $18,233 in 2007 to $37,090 at the end of 2023.
Use the IRS Where's My Refund tool or the IRS2Go mobile app to check your refund online. This is the fastest and easiest way to track your refund. The systems are updated once every 24 hours. You can contact the IRS to check on the status of your refund.
The Early Refund Advance Loan had a 35.53% Estimated Annual Percentage Rate based on a loan duration of 75 days. This equated to a 7.3 % finance charge of the loan amount. It was available December 11, 2023 until January 14, 2024. Outlined below are examples of credit terms for the Early Refund Advance Loan.
If your refund status used to be your tax return is still being processed, but now the status says it is being processed, the IRS may have detected an issue in your tax return that could cause a delay in the release of your tax refund.
Claim a Refund
If you are due a refund for withholding or estimated taxes, you must file your return to claim it within 3 years of the return due date. The same rule applies to a right to claim tax credits such as the Earned Income Credit.
Request an expedited refund by calling the IRS at 800-829-1040 (TTY/TDD 800-829-4059). Request a manual refund expedited to you.
If the IRS is reviewing your return, it may have questions about your wages and withholding, or credits or expenses shown on your tax return. The review process could take anywhere from 45 to 180 days, depending on the number and types of issues the IRS is reviewing.
Allow a minimum of 2 weeks for an offset to show on your account.
The Fresh Start Program was designed to help taxpayers stuck in debt to reduce the amount they owe, so they can get back on track with their tax payments and begin to plan for their financial future.
Act now to get relief with Fresh Start
During the COVID-19 pandemic, the government paused student loan collections on all federal loans, including tax refund offsets. That pause ended in September 2023. However, the U.S. Department of Education said it will postpone tax refund offsets until at least September 2024.
The IRS will only take your refund if you're delinquent with your student loans to offset debt. Your student loan interest deduction might be lower than prior years if you paid less interest in the current tax year. This can affect how much refund money you receive.
The IRS considers canceled debt, including most forms of student loan debt forgiveness or student loan discharge, to be taxable income. However, borrowers working toward loan forgiveness have been exempt from taxes thanks to the American Rescue Plan Act of 2021.
Fifteen percent of Americans with student loans are behind on their payments. Fifty-seven percent of Americans with student loans would pay down other debts with savings from federal student loan forgiveness.