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.
This bill, for taxable years beginning on or after January 1, 2024, prohibits the Controller from offsetting delinquent accounts against the personal income tax refunds of an individual who received the California Earned Income Tax Credit (CalEITC) or the Young Child Tax Credit (YCTC) for the taxable year.
After an inflation adjustment, the 2024 standard deduction increases to $14,600 for single filers and married couples filing separately and to $21,900 for single heads of household, who are generally unmarried with one or more dependents. For married couples filing jointly, the standard deduction rises to $29,200.
Once you have confirmed it is not a scam, you can take steps to try to stop the tax refund offset by requesting a review. To request a review, contact your loan servicer. If you do not know who your loan servicer is, you can also contact the Department of Education Default Resolution Group.
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.
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.
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.
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.
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.
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 .
Consequences of Default
The entire unpaid balance of your loan and any interest you owe becomes immediately due (this is called "acceleration"). Your tax refunds and federal benefit payments may be withheld and applied toward repayment of your defaulted loan (this is called “Treasury offset”).
If you've defaulted on a private student loan and the lender has gotten a court order to garnish your wages, the lender can move forward with that garnishment. However, private student loan lenders cannot seize your tax refund or child tax credits.
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.
BFS will send you a notice if an offset occurs. The notice will reflect the original refund amount, your offset amount, the agency receiving the payment, and the address and telephone number of the agency. BFS will notify the IRS of the amount taken from your refund once your refund date has passed.
The IRS may agree that you have a financial hardship (economic hardship) if you can show that you cannot pay or can barely pay your basic living expenses. For the IRS to determine you are in a hardship situation, the IRS will use its collection financial standards to determine allowable basic living expenses.
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.
An income-driven repayment (IDR) plan bases your monthly student loan payment amount on your income and family size. For some people, payments on an IDR plan can be as low as $0 per month.
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.
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.
For most federal student loans, your loan will go into default if you haven't made a payment in more than 270 days. If you default on a federal student loan, you lose eligibility to receive additional federal student aid and may experience serious legal consequences. Was this page helpful?