Tax Refunds Temporarily Paused
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.
Keep in mind that the loan payments themselves aren't deductible, just the interest you paid. Federal student loans offered interest rates between 6.53% and 9.08% for loans disbursed starting July 1, 2024. Before you take a student loan interest deduction, check whether you paid interest and if so, the amount you paid.
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).
What should I do if my loans were in default prior to the payment pause? 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 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.
Will Treasury offset, such as withholding of tax refunds and Social Security benefits, resume after the student loan payment pause ends? No. If you're eligible for the Fresh Start for defaulted loans, any collections on those defaulted loans, including through Treasury offset, will stay paused through Sept. 30, 2024.
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.
We often get asked, how do I stop IRS wage garnishments, and what is the maximum amount the IRS can garnish from your paycheck? Generally, the IRS will take 25 to 50% of your disposable income. Disposable income is the amount left after legally required deductions such as taxes and Social Security (FICA).
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.
Can the IRS take my refund for student loans if I'm approved for a deferment? Share: If your student loan is in deferment, the IRS won't take your refund. The IRS will only take your refund if you're delinquent with your student loans to offset debt.
If you default on a federal student loan, then your wages or bank accounts can be garnished without a court order or judgment. The maximum that can be withheld for federal student loan garnishment is 15% of your disposable income.
Student loans can factor into your taxes as the interest is often tax deductible. So, you can reduce your tax bill if you include the amount of interest you've paid during the tax year.
The Fresh Start program for borrowers with previously defaulted student loans will prevent withheld tax refunds through at least September 2024. And borrowers won't newly fall into default as payments resume. The White House announced a 12-month student loan on-ramp from Oct. 1, 2023 to Sept.
Prevent an offset
Pay the full amount listed on the Intent to Offset Federal Payments (FTB 1102). Use the payment coupon included in the letter when you send your check or money order. To make a payment online, visit Payment options .
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.
The IRS can garnish your wages but won't start the garnishment without giving you notice and an opportunity to make payment arrangements. However, unlike most other creditors, it doesn't have to first sue you and get a judgment to start the garnishment process.
Bank accounts solely for government benefits
Federal law ensures that creditors cannot touch certain federal benefits, such as Social Security funds and veterans' benefits. If you're receiving these benefits, they would be exempt from garnishment.
An economic hardship occurs when we have determined the levy prevents you from meeting basic, reasonable living expenses. In order for the IRS to determine if a levy is causing hardship, the IRS will usually need you to provide financial information so be prepared to provide it when you call.
If you need more information on the offset, contact the Bureau of the Fiscal Service at 800-304-3107 (or TTY/TDD 866-297-0517) to find out where Treasury applied your tax refund.
The most effective way to stop garnishments or other levies is to pay in full.
If you owe back taxes, the IRS will take all your refunds to pay your tax bill, until it's paid off. The IRS will take your refund even if you're in a payment plan (called an installment agreement).
Federal student loan wage garnishment
You must have missed nine months of payments for federal loans before the government can garnish your wages. Your servicer does not need to take you to court to begin garnishing.
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.
If you repay your loans under an IDR plan, any remaining balance on your student loans will be forgiven after you make a certain number of payments over 20 or 25 years. Past periods of repayment, deferment, and forbearance might now count toward IDR forgiveness because of the payment count adjustment.