The student loan tax offset program resumed in 2024. If you have federal student loans in default, your 2025 tax refund may be at risk.
Collections (offset and garnishment) on most defaulted loans will stay paused through Sept. 30, 2024, due to the Fresh Start program.
Those who are not able to make monthly payments until September 30, 2024, will not be considered delinquent, placed in default, or submitted for tax refund offset requests (The White House, 2023). Borrowers with no defaulted loans pre-pandemic will not be impacted by tax refund offsets until after 2025.
The government may take your federal income tax refund if you are in default. Computer records of all borrowers in default are sent to the I.R.S. If you are in default on your federal student loans, all or a portion of your tax refund may be taken and applied automatically to your federal student loan debt.
Those who are in default could risk having their tax refund seized come tax time. You might be planning on getting a tax refund in 2025 but if you're in default on your federal student loans, your refund could be at risk.
Not all debts are subject to a tax refund offset. To determine whether an offset will occur on a debt owed (other than federal tax), contact BFS's TOP call center at 800-304-3107 (800-877-8339 for TTY/TDD help).
You don't get reported when you're in forbearance. During the on-ramp period (through Sept. 30, 2024), we automatically put your loan in a forbearance for the payments you missed. Here's what this means: Your account was no longer considered delinquent and was made current.
If you have an objection to the debt, you have the right to request a review of your objection. If you're successful, your tax refund and other federal payments will not be offset, or the amount being offset may be reduced. If you're unsuccessful, your tax refund and other federal payments will be offset.
What happened? Student loans disappear from credit reports 7.5 years from the date they are paid in full, charged-off, or entered default. However, education debt can reappear if you dig out of default with consolidation or loan rehabilitation. Student loans can have an outsized impact on your credit score.
The student loan payments pause included a pause of collections on defaulted loans. Collection efforts, including collection calls and wage garnishment, will resume one year after the payment pause ends—no later than September 2024.
You can take a tax deduction for the interest paid on student loans that you took out for yourself, your spouse, or your dependent. This benefit applies to all loans (not just federal student loans) used to pay for higher education expenses. The maximum deduction is $2,500 a year.
To qualify for the IRS Fresh Start Program in 2025, taxpayers generally need to meet one or more of the following conditions: Owe Back Taxes: Individuals or small businesses with outstanding federal tax debt.
Prevent an offset
Use the payment coupon included in the letter when you send your check or money order. To make a payment online, visit Payment options .
For tax year 2024, the standard deduction for married couples filing jointly rises to $29,200, an increase of $1,500 from 2023. For single taxpayers, the standard deduction rose to $14,600, a $750 increase from the previous year.
You can check your federal student loan status by logging into StudentAid.gov with your FSA ID. When you select your loan, you can see if the status is listed as default. You can also check your federal or private loan status by checking your credit report.
For 2024, there's an offset of $700 for taxpayers with a taxable income under $37,500, with a pro-rata payment up to $66,667.
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.
Why did my college send me a check? A refund check is money that is directly deposited to you by your college. It is the excess money left over from your financial aid award after your tuition and additional fees have been paid. Your college may send you a check or the money may be deposited into your checking account.
The department first implemented the forbearance in August 2024 due to ongoing litigation between the department and seven states challenging the debt cancellation effort's legality. The plan is under an injunction preventing the department and servicers from forgiving loans.
In July 2024, AFT sued MOHELA for a wide range of unlawful practices, including illegally executing a “call deflection” scheme to deny service to borrowers who need help.
Understanding Default
For a loan made under the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan Program, you're considered to be in default if you don't make your scheduled student loan payments for at least 270 days.
If a taxpayer refund isn't what is expected, it may be due to changes made by the IRS. These changes could include corrections to the Child Tax Credit or EITC amounts or an offset from all or part of the refund amount to pay past-due tax or debts.
Your employer is legally obligated to inform you of any wage garnishments. Reach out to your HR department or payroll representative and ask for details on the amount being garnished from your wages.
If the IRS is reviewing your return, the review process could take anywhere from 45 to 180 days, depending on the number and types of issues the IRS is reviewing.