Tax Refunds Temporarily Paused
Due to the COVID-19 payment pause, most collections on federal student loan debt, including all tax refund offsets. 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. Additionally, all collections on loans that are eligible for Fresh Start will be paused during the Fresh Start period, which will run until one year after the payment pause ends. See our page on Fresh Start for more information about signing up for this time-limited program.
Tax refund offsets are one of the government’s powerful tools to collect defaulted federal student loans. 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.
You will get a letter before your taxes are taken letting you know that your refund is being taken and giving you information about requesting a hearing to stop the tax refund offset. If you didn’t get that letter before your refund was taken, call the Treasury Offset Program at 1-800-304-3107.
Make sure your contact information is updated with the Department of Education and your loan servicer. Many people who don’t get notice that their tax refunds have been taken have moved and failed to let the government know their new address. Don’t miss out on important updates. Call your loan servicer or log in to your studentaid.gov account to update your contact information.
Can I stop the government from taking my tax refund?
If you get a letter from the federal government letting you know that your tax refunds are being taken to pay back your student loan debt, don’t ignore it. First, make sure that the letter is not a scam. There are a lot of scammers pretending to be the government. Before you call any numbers on any letter you receive, make sure to do a quick internet search to verify the number you are calling is actually the federal government. 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 can call the Default Resolution Group at 1-800-621-3115. You can find more information and set up an account with the Default Resolution Group to manage your requests online at myeddebt.ed.gov.
What will the government consider when reviewing my request to stop the tax refund offset?
The government will usually consider whether or not you have any defenses to paying back your student loan debt.
Some of the main defenses include:
- you already repaid the loan,
- it is not your loan or there is some other reason why you do not owe the money,
- you have already entered into a repayment agreement with the loan holder and are making payments as required,
- you have filed for bankruptcy and the case is still open or the loan was discharged in bankruptcy,
- your school lied to you about the program or the loans you were taking out,
- the school failed to pay you a refund after you withdrew from classes,
- you are totally and permanently disabled,
- the loan is not enforceable, for example because of forgery or other reason, or
- you are eligible for a closed school discharge.
What will the government stop a tax refund offset because of my financial hardship?
In some cases, the government will stop a tax refund offset due to your financial hardship, but you usually have to be facing a significant and urgent hardship, such as an eviction, foreclosure, or utility shut off, in order to stop the offset because of a hardship.
For more information on collection of federal student loan debt, visit the Federal Student Aid website page on collections.
