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.
Collections (offset and garnishment) on most defaulted loans will stay paused through Sept. 30, 2024, due to the Fresh Start program.
Yes, student loans will take your taxes in 2025, but only under specific circumstances: Your federal student loans must be in default. This means you've missed payments for at least 270 days (about nine months). Only federal student loans are eligible.
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.
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.
Generally, if you miss payments, your loan is considered delinquent and is reported as such to the national credit reporting agencies. 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.
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.
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.
Typically, these refunds are intended to cover school-related expenses such as off-campus housing, supplies or transportation. However, there are also cases in which students have borrowed more than they actually needed, resulting in a refund check. It's important to know that refund checks are not “free” money.
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.
Your loan holder can order your employer to withhold up to 15% of your disposable pay to collect your defaulted debt without taking you to court. This withholding (“garnishment”) continues until your defaulted loan is paid in full or removed from default.
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.
All things being equal, it might. Your tax refund may be bigger this year due to inflation-related changes to the standard deductions and tax brackets for 2024. These adjustments could translate to a bigger tax refund compared to 2023 if your income, withholding, filing status and tax credits stay the same.
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 .
Can student loans in collections be forgiven? Yes, student loans in collections can be forgiven. Through the DoE's Fresh Start Program, borrowers with defaulted federal student loans can return to making payments without a past-due balance.
The federal StudentAid website explains that tax refund garnishments were paused only through September 30, 2024. That leaves the door open for your next tax return to be taken by the U.S. Department of Education to offset your outstanding federal student loan payments.
Will my tax refund also be garnished and applied to student loan debt? Share: Usually only the state and federal governments are able to take your tax refund, therefore you'll probably get your refund if your student loan debt isn't: With the state or federal government.
There's one upside to your student loan payments: they might reduce your 2024 tax bill. The student loan interest deduction allows qualifying borrowers to deduct up to $2,500 a year in interest paid on eligible private or federal education debt.
The program is designed to help return borrowers to good standing, avoiding the risk of garnishments. Enrollment in the program ended in October 2024. If you missed the deadline and your loans are in default, you could face garnishments beginning in 2025 on both your federal and state tax refunds.
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.
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).
Can I get a refund if I already received forgiveness or paid off my loan? No. If you have already received forgiveness or paid off your loans, you are not eligible for a refund of prior payments.
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.
Your student loan servicer(s) will notify you directly after your forgiveness is processed. Make sure to keep your contact information up to date on StudentAid.gov and with your servicer(s). If you haven't yet qualified for forgiveness, you'll be able to see your exact payment counts in the future.