For anyone getting a refund, tax season is the best time of year. But for those who have defaulted on their federal student loans, their potential joy can be seized by the IRS to pay down the federal debt.
It may not currently be tax season, but it’s never too early to start preparing to secure that refund. Specifically, if you have federal student loans that you’re behind on, it’s in your best interest to get in good standing before the Department of Education decides to collect your tax refund.
If you’re worried about the IRS taking your tax refund, you’re in the right place.
Note: Stopping tax offsets takes 6-9 months for most people. If you're looking at this article right before filing your tax return, you might want to wait and get this process completed first.
If you're not quite sure where to start or what to do, consider hiring a CFA to help you with your student loans. We recommend The Student Loan Planner to help you put together a solid financial plan for your student loan debt. Check out The Student Loan Planner here.
The Basics of Tax Offsets
First, tax offsets are legal. The Treasury Offset Program, created in 1986 and overseen by the Bureau of Fiscal Service, allows departments of the federal government to request that the IRS seize tax refunds to pay down debt owed to the federal or state governments.
Unlike for private loans, the federal government doesn’t need permission from anyone to garnish your earnings, including your tax refund, if you have defaulted on your federal student loans.
In the case of federal student loans, the Department of Education may send the Treasury a request to seize your tax refund to put toward defaulted loans. If they do this, they can take your entire tax refund. If the debt is paid off and any amount of your refund remains, it will be returned to you.
If you have a spouse with whom you file your taxes jointly, the IRS can seize the entire joint tax return, even if your spouse is not connected to your federal student loan. However, it is possible to get your spouse’s portion of the refund returned to him or her.
It’s important to note that, because there is no statute of limitations for federal loans, the IRS can offset your taxes for every year your federal student loans are in default.
Fortunately, the IRS is legally required to notify you by mail of their proposal to offset your taxes and allow you some time to respond.
If you have federal student loans that are in default, you may receive a letter in the fall notifying you that the IRS plans to take your potential tax refund and apply it to your education debt. The letter will include information about your loans and instructions on how to proceed.
Once you get the letter, you can do one of three things:
1. Request a review to challenge the offset.
2. Agree to pay the debt.
3. Do nothing.
Request a Review to Challenge the Offset
First, check all the information in the letter against your records and your loan accounts. You can even request an official copy of your loan information from the Department of Education. If anything looks incorrect, you have the right to request a review hearing, where you’ll have the opportunity to prove that your taxes should not be offset.
Here are some common reasons you might request a review hearing:
Challenging the offset can be difficult, so you need very compelling proof. If you’re set on this course of action, consider hiring a lawyer and the costs of doing so.
Agree to Pay the Debt
If you've agreed that you owe the debt, that doesn't mean that you are expected to pay all of it all at once. You certainly pay if all if you are able, but we're guessing that if you're here, you're not able to do that.
Instead, you can enter into a written agreement with the Department of Education to pay the debt. How will you pay the debt? First, you'll need to take steps to remove your loans from default. That could include default rehabilitation or consolidation.
After that, we suggest looking into federal repayment plan options so you avoid defaulting again in the future.
Of the various repayment plans offered by the Department of Education, borrowers who default would likely benefit most from income-driven repayment plans. In those plans, your payment amount is calculated each year based on your income and family size and can be as low as zero. Plus, after 20 to 25 years, any remaining balance is forgiven.
Of course, do thorough research before enrolling in any repayment plan. None of them are one-size-fits-all so make sure the one you choose works for your situation.
Do Nothing
If you choose not to take action, miss the deadlines to take action, or never received a letter warning you of the proposed tax offset, the IRS will take your tax refund. Thankfully, you’re not completely out of luck at this point.
If you believe your refund was taken in error, you can reach out to the Department of Education (not the IRS) to contest the offset. See the list above of common reasons to request a review hearing for the types of errors that would get your refund returned to you.
If your refund was not taken in error but you can prove financial hardship, you may be able to get at least a portion of the refund returned to you. This method is very difficult and is not guaranteed to be successful.
If you filed your taxes jointly with your spouse, he or she can file an “injured spouse” claim to get his or her portion of the tax refund returned.
Private Loan Tax Offset
If you have private loans and you fall behind, you don’t have to worry about not getting your tax refund; collectors of private loans have no way to seize the refund. However, your private loan servicer can take action to collect your loans much sooner than federal servicers can. Unlike federal servicers that can’t take collection action until loans are 270 days past due, private servicers can take collection action as soon as you’re late on just one payment.
If your private loans are delinquent, your private loan servicer can sue you for the ability to garnish your wages and freeze your bank account. Court approval is the only way a private servicer can take your earnings, so you have a much better chance of preventing it if you show up to court with a good defense.
How to Prevent Tax Offsets
If you’re approaching or in default on your federal student loans, it’s best to take action so they are not still in default come tax season. That means either curing the default through default rehabilitation or consolidation or entering into a repayment plan with more affordable monthly payments so you can work to stay current.
If you're not quite sure where to start or what to do, consider hiring a CFA to help you with your student loans. We recommend The Student Loan Planner to help you put together a solid financial plan for your student loan debt. Check out The Student Loan Planner here.
We break down the process to get out of default here: How To Get Out Of Student Loan Default In 5 Easy Steps.
We'd appreciate hearing your thoughts and experience in the comments below.
Carmaletha Pointer says
So I called the offset number to see who I owe it says I only owe one dept and that’s child support but it didn’t say anything about my student loan am I safe
Robert Farrington says
If you have an offset (for loans or child support), they can take any Federal payment, including your tax return.
Angiegax says
The department of Education stopped my rehabilitation program after 4 months I spoke with them and they say my application is being viewed and I asked them if my taxes were going to be taken and she says no. I filled out and application for my student loan to be forgiven completely because I had received a settlement from the school I attended for being mislead and promises that were made. Is it possible for me to still get my taxes if I call the offset number and it says I have no offsets and could my student loan be completely forgiven?
Robert Farrington says
If you’re still technically in default (according to your credit report), you run the risk of an offset. What harm does it make to sort out your loan issues first, then file your tax return?
Jeremy says
What school did you go to if I may ask? I want to start looking into doing the same thing.
Robert Farrington says
Check out this article: https://thecollegeinvestor.com/18752/understanding-borrower-defense-repayment/
Amber says
Can you please elaborate on the school being misleading, and making promises? Also what, where, when, and who, did you talk to to accomplish a win in your favor? I ask because now I have a student loan for what i feel the same as yours wasted time wasted money and no degree nothing to show for the 16,000 I have to pay back. Because I was lied to. Thank you
Robert Farrington says
You can read this: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/borrower-defense
Latrice says
I have Tax topic 151 and I received my state taxes with no problem but they want me to call them with a reference number1242. I am confused
Robert Farrington says
Tax Topic 151 is due to a tax offset. IRS Error code 1242 is a freeze on your return. You need to call them and find out what’s up.
Lakeisha says
Just found out that I have a offset and my full refund was taken I did not get a letter in the mail, no warning that this was about to basically put me and my kids in a really bad spot. To the point that in 5 days we will be homeless. My question is I have all the documents that I need to do my hardship , and by the time they make a decision we will be out on the streets is there any way that this process to get my refund back go faster I am so scared I have 6 kids and one in oven. What should I do???
Robert Farrington says
That’s a terrible situation. You need to follow up on your offset and student loans. You need to then get out of default ASAP.
Crystal Thompson says
My defaulted student loans are being consolidated and I haven’t received a letter from the Department of Education last fall, so am I safe to file my taxes without them being taken?
Robert Farrington says
It depends on where you are at in the process. You sometimes won’t receive the letter until after the offset happens.
Jessica Scott says
I am currently in a rehabilitation program to get my loans out of default. I filed my taxes and they took my entire refund. I was never notified of the offset. Can they do that?
Robert Farrington says
Yes, until you have completed your rehabilitation agreement, you’re still technically in default. Sadly, you probably should have waited to file your taxes (since you filed pretty early).
Finish getting out of default, then you won’t have to worry about this in the future.
Tasha says
So when you say wait you mean get a extension and file later after you set up a agreement and been paying ?
Robert Farrington says
If you’re expecting a refund, you don’t file an extension at all – you just don’t file. You only need to file an extension if you owe taxes. But, if you owe taxes, none of this matters because they aren’t garnishing anything.
Precious says
If I’m in default but doing loan consolidation how long do it take to get out of default so i can file taxes?
Robert Farrington says
Every agreement is different, but typically about 3-6 months to be 100% complete and on a new repayment plan.
Dell McDonald says
My student loan is in default. My bankruptcy was approved last August and I am in the process of going through a rehabilitation plan with DOE. I initiated review of my expenses to determine a payment plan October 2017 and started sending them $20 a month (5 consecutive payments thus far). However, they have continually requested additional information. Hopefully, I receive the approval over the next couple of weeks.
The agent for the DOE noted that my pay should not be garnished nor should my taxes be offset. I’m hesitant to file my taxes as I do need this refund. What is the risk of filing my taxes now while they are determining my case vs deferring filing my taxes for another 9 months until I’m out of default/rehab status?
Robert Farrington says
If you’re expecting a refund there is no harm to you in waiting. If you owe, you need to file on time. I personally would be doing your taxes, ensuring that you get a refund, and then waiting. That way you know you don’t owe.
Jennifer says
I am starting the rehab program. I have already successfully done this with another student loan that was a state loan not federal. Now Federal loan is going after my tax return. I started to file my taxes and put them on hold. I called the DOE and they said unless I am facing eviction or foreclosure, I can not apply for a hardship. Is this true. Because last year I filed a Hardship with the State Loans and was able to get my full refund back.
Robert Farrington says
You won’t get any type of exemption to the offset. You need to complete rehabilitation first so get your refund.
Remember – tax refunds are also optional. You can adjust your withholding with your employer so you owe taxes – then you get paid more each paycheck and never have to worry about this again.
moni says
This situation sounds like mine. How can I get an extension ?they’re being offset. While I was in process of starting income driven payments. Now I’m making 90 dollar payments every month and afraid to do my taxes DOE told me I could request an extension and I will be in good standing until I finish 3rd payment then I could do my taxes in October and get my refund .is this correct ?
Robert Farrington says
You can file an extension with your tax software or with an accountant.
Chaney says
My big tax refund was taken after I found that out I filed to make payment arrangements and get me out of default they haven’t taken my little tax refund yet am I in the clear so I’ll get that back called depaprtment of education and they said they’ll only take it if it’s participates in a certain program allowing them to take both state and federal taxes is that true
Robert Farrington says
What do you mean big and little refunds? Do you mean Federal and state? They typically only take your Federal refunds, not your state refunds.
Bill says
I thought my student loans were in deferement and I have never received any kind of communication, written or electronic, that I was in default. Never received a letter about an offset from the IRS or the DOE but after my refund was supposed to be deposited and wasn’t there iearned of the offset. Am I not supposed to be notified of not only the offset, but that my loans were in default? My family is screwed.
Robert Farrington says
You should be notified, but that also assumes that all your contact information and such is correct. I would get a hold of your lender ASAP and see what’s going on.
Debra says
I did not owe a student loan went to court 2x and student loan did dismissal stating I owe nothing and still taking my tax return. I never heard of Loan tax offset. Question? will this work for me
Robert Farrington says
What do you mean? You mean your student loan was dismissed and you’re still seeing your tax refund taken?
Kelly says
I have been in the rehabilitation program for my student loans now for 3 months…I waited to file my taxes until now. Will they still take my federal tax return?
Robert Farrington says
You must complete your rehabilitation agreement fully before you’re out of default and “safe” to not have your tax refund taken. What does your agreement say? It’s usually at least 6 payments (months), if not longer.
Christina says
My student loan will be out of default in September. I filed for an extension for my 2017 taxes and the deadline is mid-October I believe and I will be filing then. If I am owed a refund, will it still be offset?
Robert Farrington says
Once you’ve completed your rehabilitation agreement complete, you should be fine.
Denise says
I just made my last payment for the rehabilitation program so how long should I wait to file my taxes?
Robert Farrington says
Until you’ve made your first payment under your new income-driven repayment plan.
Tammy shore says
My friend told me .. h&r block said they can only take your loans once every 3 years.. is this true??
Robert Farrington says
No, you can see your tax refund offset every year. But it gets worse – just because they take your tax refund, doesn’t mean it even goes to your loans. It usually just goes to collection fees and interest. So, your balance still grows.
You NEED to get your student loans rehabilitated. Read this: https://www.thecollegeinvestor.com/15577/student-loan-rehabilitation/
Eboni Robinson says
Hello, i am currently on offset of 4thousand. And im currently on the program to get off of default which will be on june 26th 2018.then my stuff will be switched back to dept of edu.and im going to get on a payment plan with them. How long do i need to wait untill i can file my taxes before December without them taking my taxes?please help
Robert Farrington says
After you’re out of default and make your first payment under your new payment plan, you should be fine.
Kimberly says
Hi Robert. I hope you can answer a question that no one else has been able to answer. My yearly income is only about 30-32k. A few years back I encountered a financial hardship and my student loan went into default. As a result the IRS offset my tax returns. I haven’t filed any taxes for 3 years. I entered a repayment plan last year and as of this month my student loan is now out of default. My question is: When can I file my current and back taxes and get my full return without any money being offset? And is there a way I can confirm it will not be off set, before I file.
Robert Farrington says
Once you’ve made at least one payment you should be good to go. Make sure you consult an accountant to file your past taxes.
Katie says
Why do they take a 8000 dollars income tax,rather then a 3200 ?This person was in the porcess of getting the student loan cleared,was cleared.
Robert Farrington says
When you get your tax return offset, it doesn’t just go to the loan, but also to collection fees and interest. Depending on the loan balance, very little may have actually gone to the loan (if any).
Angela says
I’ve completed my rehabilitation program in April. Today, I just made my first payment with the new payment plan. I called TOP and the automated line stated that there were not any offsets against my SS#. How much longer should I wait to file my taxes? I rather be safe than sorry. I would like to get my tax refund this year 🙂
Robert Farrington says
Once you make your payments on your new plan, you should be fine and shouldn’t have any more offsets due to your student loans.
Melody says
I have a student loan offset that has been seized for the past two years. I plan to return to school. Will my tax refunds continue to be seized while I’m a student?
Robert Farrington says
Yes, your tax refunds will continue to be offset as long as you’re in default. Furthermore, you can’t get any more Federal loans, and you likely won’t be able to qualify for any private student loans due to your credit.
Liliana Gonzalez says
I have completed 9 months of rehabilitation program, I am now being switched to another repayment program. When will I be okay to file my taxes with out fear of getting refund check garnished by Department of education?
Robert Farrington says
You’re typically fine after you make your first payment on your new repayment plan.
Liliana Gonzalez says
Thank you, I will keep you updated on how it goes 🙂
Jlee says
I will finish my rehabilitation agreement in October and I filed an extension … and I think the deadline to file with turbo tax is October … will I still be able to file my taxes in Nov or Dec? I just want to make sure the offset is taken off my taxes… and I read were you said to wait till you make your first payment on the new repayment plan?
Robert Farrington says
You can file a tax return for a refund anytime within 3 years. So, wait until you are 100% on your new payment plan and then file.
Brii says
Hello, my taxes were taken last year 2017 for $5,000 because my student loans were on default. This year, I gor an extension to file my taxes and as you know we have until mid-October. As of July 21, 2018 my loans are out if default and back in good standing and today I made my 1st monthly payment after the rehabilitation program. I called to check if there were any offsets still and the offset for 2017 ia still showing for $5,000. Am I still at risk for my refund being taken away this year?
Robert Farrington says
Give it a couple weeks. You should be fine.
Dana says
I saw on several post that it will be ok to file your taxes after you are making payments on the new payment plan. I’m unsure of what this is. I supposedly made my last payment July 16, 2018 to Performant (a collection agency for USDE), as well I’m on the income based program with Nelnet. I’m very confused. I completed the 9 month rehab with Performant, USDE says I’m not in default, but the offset 800 number says I still have a debt. I don’t know what to do . Please help
Robert Farrington says
Give it a few weeks and you should be fine. It hasn’t even been a month since you cleared your loan out of collections.
NJE says
Hi Robert, I hope you can help/give me some clarity. I’m concerned following all the research I’ve been doing about tax offsets. So, last year my Federal AND State refunds were offset (about $2,500 in total). At the time, I was not in any rehabilitation program and my wages were also being garnished. Fast forward to now, I finished paying off the loan related to the garnishment and was no longer having any wages taken as of 3 months ago. I also started a rehabilitation plan with the third-party collector and have made 5 consecutive on-time payments. I am also currently unemployed as of one month and a half ago. I am hoping these three things together will be enough to avoid another $2,500 offset this year. I am filing the Treasury Offset Request for Review paperwork this weekend, although I have not received any notice saying they were planning to offset (I didn’t receive any notice last year either, despite being offset). Additionally, I called the number to see if I would be offset. The automated message only mentioned last year’s offset, it did not say anything about an offset connected to my social security number for this year.
Robert Farrington says
It won’t be enough. You need to complete the rehabilitation program and get on an income-driven repayment. Only then will the offset be removed.
Christopher M Leal says
I’m in the rehabilitation program I have one more payment to make which I will do this in a couple of days. My tax advocate just sent out my tax papers today I do believe. So my final payment will be made b4 the DOE receives it. I wanna know if I will be getting anything back. Plus it would help since I’m also a single father of 2 kids.
Robert Farrington says
It’s very close to call. We don’t recommend submitting your tax return until after you make your first payment under your new repayment plan.
Christopher M Leal says
Last rehabilitation payment paid last week still waiting on the other agency for my repayment plan after the rehabilitation program… Still I haven’t received anything regarding an offset or anything… And I first filed back in February and once again in April and nothing yet.. We r almost in September now
Christopher Leal says
And also I called the offset line and it told me I had 2 offsets. And those offsets were taking out last year and one of them was for child support and I know I don’t owe anything and I talked to the dcs representative she said my case was closed since last year.
Christopher M Leal says
What does it mean if Its showing I have 2 offsets but the offsets that r showing are from last years tax season. Saying I made payments in February and may of last year. And one of the offsets is for child support but my child support case has been closed for a year cuz I paid it all off last year
Robert Farrington says
You need to contact the agencies that issued the offset to have it removed: https://www.irs.gov/newsroom/six-facts-on-tax-refunds-and-offsets
Leslie Rios says
Hello my problem is this. My loans were in deafult last year and $7200 of my refund was applied towards my student loans. I am on a rehabilitaion repayment plan now. And current. I have made have made 3 payments. Will my tax refund be offset as well?
Robert Farrington says
Once you complete your rehabilitation program and make your first payment under your new repayment plan, you should be good to file your taxes.
Casie says
I wish I would have read all this before today. I was told as soon as my loans were out of default I could file my taxes. That they could not take it. I sent them in today. I was just out of default last Saturday. I haven’t made a payment on a new plan yet. I called the offset number. I have one account in offset. They’re still going to take my money aren’t they!? 🙁
Robert Farrington says
It’s a risk that they will – it’s all based on how fast your paperwork to remove the offset and default process versus how quickly the IRS processes your return.
Marisa says
If they do take it even though your out of default what can you do to get your refund?
Robert Farrington says
You can try to dispute it, but that’s a hard dispute because you’re not out of default until all the paperwork is processed and you’re making payments to your new lender.
Arianna says
I am done with the rehab payment program as of 09/010/2018. I spoke with AFS and they stated my loans were out of their hands. with that being said, should I file my taxes? I haven’t started a new payment plan yet.
Robert Farrington says
To be safe, we always recommend waiting until you’ve made your first payment on your new repayment plan.
Marisa says
So I just made my last payment on my rehab default they now have switched me to a new Leander. And I am out of default. I have not made a payment to new Leander and have already filed my taxes will they take my refund ? I called and still have an offset they told me it could take 2 to 3 weeks. What can I do if I get my tax refund garnished ?
Robert Farrington says
It’s hard to say. You have two different organizations processing paperwork, and who-ever wins gets your money. That’s why we recommend waiting until you’ve made your first payment under your new repayment plan before filing your taxes.
Matt cox says
If i am still needing to file 16 and 17 taxes but in 18 an offset is granted, can they go after my 16 and 17 return?
Robert Farrington says
Yes, any Federal payments you get after the offset is grant can be taken.
Jenica Branson says
How do I go about getting the offset reversed? I am doing a reabillitation program and the representative told me that my student loans were not in jeopardy of being garnished or taken by the irs. Especially agreeing to go into the reabillitation program and making payments. I keep reading that being in a rehabilitation program is a valid reason to reverse the offset from the irs, but from what I have read on this website it seems almost impossible. What the the reasons to which the irs wouldn’t reverse the offset being in a rehabilitation program, or what factors WOULD make the irs agree to reverse the offset?
Robert Farrington says
They won’t until you’re done with your rehab program and make your first payment under your new repayment plan. Easiest way to avoid that is not file your tax return until you’re rehabilitated.
Ed says
I was already aware of my offset my question is I just filed my taxes for 16&17 2017 was for 5757 and that was offset but 16 was for 2800 they took 300 from that but I got the rest I wasn’t expecting a return at all cause I knew about my offset i still have to file for 2015 am I in the clear to get a return or no?
Robert Farrington says
You need to call and see if you still have an offset. If you do, then you’re not clear. If you don’t, then you’re clear. If your loans are still in default, you likely have an offset still.
Ed says
Why wouldn’t they take all of my 16 return? I don’t get why I received a return which it should of went to my student loan i called the offset and I don’t have an offset but I called my collector and I owe 1,400 still which is why I’m confused I got a return
John says
Ok. My student loans I guess have been in default since 2000. And at that point a tax refund was taken and I personally went to a IRS tax office to be sure I had no other outstanding balance with DOE to ensurey tax’s would not be taken again. Now fast forward I filed taxs for year 2013 and received a tax refund. Then didn’t file again until 2016. Then they was taken. Once again 2017. Cunfussimg as this sounds it is because I dug in to amount of my loan and discoverd that I owe an alarming total. And seemed to be a larger amount granted for the loan then I received when I was in college. Needless to say I not once ever filled out for any type of loan the entire time I was in college nor was I eligible for assistance because ofynparents income was to large. I understand there was some type of loan u still can get but if my parents paid for my tution every semester how could they issue a loan 1st of all I never applied for bit was told that “I had some money at the cashier office on campus and go pick it up” Any 18 year old going to spring break would sign there soul away not knowing the grave mistake they was making
Some I admit that I received a check in amount of 1200$ around April of 1996. But never applied for it then lastly after have rough spot in life a being incarcerated in 1998-2000, some type of form was filled out looks like on my behalf bye Good knows who and was totally not valid
I have the forms where I sent a had a letter notorized stating I didn’t do all this and sent copies of forms. Better yet in 2001 the IRS told me I had no other outstanding balances with them. One letter I received back said there finding showed that I am responsible for entire loan. Im broke at a low paying job because of being an convicted felon bye the Untied States of America. Repaidy debt to society in anform of 10 years in Federal prison. Any type of guidance would be helpful. On a ending note a 1200$ whatever u call it gave to a 18year old kid 22years ago I guess as grown to an 8000$ debt to DOE and isn’t Decreasing bye any amount due to collection agency charges. Please, Please Help me anyway u can Thanks..
Robert Farrington says
You need to follow the directions on the article above – get out of default by rehabilitating your loans and making payments on a payment plan.
The reason you’re not making any progress is that these tax offsets are going to interest and collection costs. These continue to grow every year, and when you file takes again, it barely goes to cover these. Your loan balance will continue to grow until you take action on the loan – even with the tax offsets.
Alicia says
I called the offset number and it says I have no offsets but could change as they’re added daily. I pressed the option to hear about debts and it told me about my student loan. Will they still take my refund if it’s a debt and not an offset?
Robert Farrington says
Are you in default on your loan? If yes, then yes, they will take your refund. If no, then they won’t.
Brianna says
Hello I have a question I have a student loan from 7yrs ago an I called the offset line an it says I don’t owe anything an on my credit karma it say charge off. Will they still take my tax return?
Robert Farrington says
What type of loan was it?
Evonne says
How do I know if my taxes will be taken? I always get a refund and am confused I have no garnishment and I spoke with a 3rd party who was going to enroll me into a forgiveness program and she couldn’t see anything stating they would take it. I need my refund so I am just wondering how I can go about finding out if it will be taken from me? I am enrolling in a rehabilitation program today so if theyre going to take my refund I’d rather file for an extension.
Robert Farrington says
If you need to rehabilitate your loans, that means you’re in default. If you’re in default, you’ll likely see your taxes offset.
Ian Font says
My student loans are currently in loan rehabilitation (3 months in out of the 9 months), am I still at risk of them taking my federal tax return?
Robert Farrington says
Yes, you will have your tax return taken until you’re out of default and fully rehabilitated. My suggestion is to wait until you’re done with rehabilitation, make your first payment under your new repayment plan, then file your tax return.
Nico says
I was never notified of my student loan being in default never got a letter. I was in prison for over ten years and never gotten a letter, I got out, got a job and have a family. Call DOE and they said I made a payment which they offset last year’s taxes but my balance is the same WTF why is that even possible and nobody giving me answer and when I ask to talk to some one that can help me they give me the run around…what can I do who can I call.
Robert Farrington says
Here’s a guide we have on how to find your student loans: https://thecollegeinvestor.com/19370/how-to-find-out-who-owns-your-student-loans/
Taiyana says
Hi, my my wages are currently being garnished for my student loans and I’m now in a Rehabilitation program. I’ve made 3/5 required payments to have the garnishment suspended and elig to make a regular payment plan. I’m curious about how long it will take to remove the treasurey offset once i complete the 5 payments and if I’ll more than likely need to get a tax extension and give it a few months.
Robert Farrington says
Once you make the first payment under your new repayment plan, you’re in the clear.
Shemere says
Hello, I too discovered an federal offset the hard way! I’ve graduated from my rehabilitation program to a new lender in October. I’ve been making payments to the new lender ever since. As silly as this sounds, I’m also curious to know if it’s safe to file without fear of being offset/garnish?
Robert Farrington says
Yes, if you’re on your new payment plan and out of default, you should be fine. You can double-check the offset hotline as well.
Katie says
So I have a question, I defaulted on my student loans of about 25,000, over the past couple (2-3) years my tax refund had been taken and applied to that. I am out of default on my credit report and owe just little over $5,000 left. With me being on good standings does that mean they will still take this years return as well or am I good to get the refund? I have 2 kids and I’m due in March with my 3rd.. I really need this money I can’t go another year without it.
Robert Farrington says
If you’re 100% out of default because you completed rehabilitation or consolidated your loans, you are good to file. You can always call the offset number to validate.
Granny says
This is so confusing. I consolidated my college loans, have a $0 amount payment due since November. So this counts as monthly payments for 3 months now, right?
How do I find out if the offset has been removed? When I called it said my total loan amount and what the offset/took in 2016, it says nothing about pending. I have not yet filed for 2017. Is it safe to file now? Or do I have to wait until they give me a real dollar amount to pay? Reading through other’s comments, I see 3 months, 6 months and 9 months; which is right? thank you
Robert Farrington says
If you’re on an income-driven repayment plan with a legal payment of $0, then that counts as a payment. You can call the offset number and validate the offset has been removed.
Rehabilitation typically takes 6-9 months, and you would know if you’re completed with it because you would be back with a major loan servicer and on a specific payment plan getting monthly statements reflecting that.
Viola Patterson says
So i called the irs off set line to see if they’re still taking my taxes from student loans and it said there was nothing listed. So does that mean I’m ok to file my taxes and that i should get my refund this year?
Robert Farrington says
Should be if there wasn’t anything listed. Are you expecting there to be something? Did you change anything from last year?
Robert says
If my last payment for the rehabilitation program is in March. How often does it take to get to a new lender so I could make my first new repayment plan I would like claim my taxes but want to be totally out of the woods.
Robert Farrington says
Last rehabilitation payment is in March, first payment under your new lender/repayment program will be in April. Then file your taxes.
Will bishop says
If I complete the three consecutive months of payments on my rehabilitation. Can I file my taxes then? Or will the still be taken?
Robert Farrington says
Most rehabilitation agreements are six or nine months. I’ve never seen a three month agreement. Are you sure that you only have a three month rehabilitation plan?
The bottom line is you want to wait until you make your first payment on your new repayment plan – NOT the rehabilitation plan.
Medina says
So I’m currently in the rehabilitation process last month for payments is February 15th… I spoke today with the agency that I am making my payments to as long as February payment is made they will not take my taxes. I called the hotline and it states that I don’t have any offsets. But obviously my student loan is in default since I am in the rehabilitation program. Question is will they still take my taxes if I file tomorrow since the line is stating I do not have an offsets?
Robert Farrington says
We recommend that you wait until you make your first payment under your new repayment plan. Especially with the shutdown there may be delays in getting your paperwork processed. The best thing you can do is wait and file after you’re on your new plan.
John says
Hello,
I had my taxes offset 3 years ago and entered the rehabilitation program paying 5$ a month for 9 months which took me out of default. I left it the way it was and never followed up. This October 26, 2018 I received a letter stating that DOE holds my defaulted student loans for offset again, today I called the new debt collector which now added another 3,500$ on fees to my loan making it 17,000$ total. They told me I wasn’t eligible for another rehab program and can make monthly payment arrangements of 143$ a month and I would be taken off the offset immediately after I made that payment of 143$ authorized by the manager I asked him and he said that the representative had misinformed me and she read me the offset rules again saying that I would pay 143$ for 12 months and then call again and work on another suggested nation wide average payment meanwhile I would still remain in default for lifetime of the loan, but my offset would come off after 5 full payments starting today. IRS owes me 6,000$ this year, another option was debt consolidation and they said something about 3 months…. I already made the 143$ payment I’m a little angry that she told me the offset would be gone after the first payment. What should I do? Also my credit score has jumped from 540 to 770 in 2 years…. it seems this loan for 11,000$ which i got in 2007 (today is 17,600$) has fallen of my credit report, by making this payment am I opening another can of worms? And is that true that after 5 monthly payments of the 143$ the offset with be gone?
Robert Farrington says
After your rehabilitation program three years ago, did you just stop making payments? If so, then it makes sense you’re in default again.
You have to get out of default AND then continue paying off the loans.
Rehabilitation is a one time thing. If you did it once, your only option left is to consolidate your loans again. Your tax return will be offset again until your loan is out of default.
You can still get your tax refund, just consolidate first and get back on track, then file your taxes.
Rhonda Ramstack says
Hello,
I received a letter from Navient saying that I completed rehabilitation and was in good standing. Do I have to worry about my taxes being off set. I haven’t filed yet.
Robert Farrington says
If you’re in good standing and have made at least one payment on your new plan you’re safe.
Lydia Anthony says
I have a defaulted federal student loan but I have recently entered in the loan rehabilitation program but I am waiting for NC to change my status from default. I have been trying to do this since March 2018 and they were just giving me the run around I was successfully entered in the program in Jan 2019. Is there any hope of getting my 2018 tax return? The offset number I called still says i owe a debt for student loans. Is there any way to fix this because I did my part for the loan rehabilitation they just dragged their feet for months so it couldn’t be completed.
Robert Farrington says
You have to complete rehabilitation first – so after you make your 9 payments and start making payments under your new repayment plan, you can file your tax return.
Storm Cantu says
If my weekly checks have been getting garnished due to a pay raise and i’m now eligible for that to happen, would it be possible to file to see my tax return again now that a good portion of my checks have been going to paying off my college loans for the last year or would it be a pointless attempt?
Robert Farrington says
No, you need to get out of default first. Also, the garnishment of your wages is likely barely going to your loans – likely just going to interest and collection fees. So, you are honestly just throwing your hard earned money away!
Go get out of default and start making payments, then you can file your tax return and get your refund once you’re out of default.
Trev says
Hey Robert,
Possible quick question:
Last year I had an offset and still filed because I started a rehab payment plan and thought that would help. It didn’t. Anyways, I fell on hard times and my account went back into default.
I got a letter in the mail today from the lender saying “Participating in loan rehab can prevent wage garnishment and tax offset. Additionally, successfully completing loan rehab can remove the default record from your credit”. I called TOP and I don’t have an offset. I’m going to call the lender tomorrow and get on the rehab program again before they assign an offset. So, is the letter true? If I get on the program now, will they not offset me? Or is it just a ploy to get me to pay again and they will still offset me here soon anyways?
Thanks!
Robert Farrington says
They will offset you if you’re in default. You need to complete rehabilitation.
Also, I don’t believe you’re eligible to rehabilitate again – it’s a one time deal and you failed the first time around. Your only option left is to re-consolidate your loans.
The only thing that’s going to help you is to get out of default (and you need to do it anyway beyond your tax refund issue).
Trev says
Apparently it was through a different lender or something because I was able to enroll in the rehabilitation program. I made the first two payments and I also paid the original lender a payment as well.
It said in the letter that participating in loan rehab can prevent tax offset. Why would they say that if they are just going to offset me anyways? I’ve been checking the treasury line the last week or so and still no offset. Is it possible that they won’t offset me? Last year by the time I got my w2 and called the treasury I had an offset.
Also, what do you know about the hardship paperwork you can send in to get your tax refund back after they take it? Does it usually work?
Robert Farrington says
It’s about completing rehabilitation – you’re still technically in default until you complete the rehab program. We recommend waiting until after that first payment is made on your new plan to ensure you’re safe – government bureaucracy and paperwork take time.
If you file your taxes jointly with a spouse, your spouse can file for injured relief and definitely get her portion of your tax refund. As for the hardship paperwork, typically doesn’t work unless you really have some extenuating circumstances.
A better idea is to get out of default. And also to adjust your W4 withholding from your paycheck so you’re not getting a big refund, but rather get bigger paychecks.
Tejana says
I completed my 9 month rehabilitation program back in Nov 18 it was transferred back to Navient. I talked with Navient and they said I had 3 more payments of $5. I made a payment Jan 7 and now have Feb, Mar. I kept asking if I file my taxes will I be offset they reassured me that I would not. But to check the offset list to be safe. who do I contact about offset list?
Robert Farrington says
Once your rehabilitation is complete and you’re back with Navient, you should be fine. But you can all the number in the article above.
Chantell Moore says
I recently learned of a offset of my students loans. I have NOT filed my tax return yet however a few weeks ago I consolidated my loans (before learning my refund would be offset) will consolidation clear my offset so I can file?
Robert Farrington says
Yes, it should clear your offset. But you should wait until you make your first payment on your new consolidation loan.
Michael says
Hello I just Realized that my tax refund is in offset due to unpaid student loans. I called and got into a consolidation program. I have to make 3 payments 20 days apart and then will be sent to a new lender. They are saying 30-60 days ( they couldn’t say if that was after my last payment or not). I do not work and have no income. My husband works an all the income we report on our taxes is his. Is there anyway to know how long it will be before the offset is lifted and we can file? Also is there any way for him to file without the offset effecting him. Can we file with me being a dependent and then amend later after the offset is resolved?
Robert Farrington says
Is there anyway to know how long it will be before the offset is lifted and we can file?
The offset will be lifted when you’re completely out of default. This means you have a new loan on a new repayment plan. That’s why we recommend you make your first payment on your new loan before filing. That 60 days is about right, but we would recommend 90 – that extra 30 days to make your first new loan payment.
Also is there any way for him to file without the offset effecting him?
No.
Can we file with me being a dependent and then amend later after the offset is resolved?
No.
Michael says
Is that 30-90 days once I started the process? I started this past week. So would that mean 30-90 after that date or 30-90 days after the last of my three payments? Thanks for your help!!
Robert Farrington says
Should be about 90 days from last week – but you need to keep track by payments, not by days.
Amber says
A little confused about the offset line & debts owed. I completed a rehabilitation on my student loans last year and have been making payments to the lender that took over the loan for about 4 months now. I called the tax offset line and it says “we found one tax offset, your 2017 taxes were offset in the amount of $x.xx (my full refund) by the department of education any questions please call them at xxx-xxx-xxxx. But then immediately after this information it says “We have found no debts for the social security number entered, but we add debts daily”
I’m assuming this means I have no debts for 2018 taxes? Why are they giving me the info for 2017 though? I never had them list the prior years info on the tax offset line. I’m so confused. I listened to the recording 3 times to make sure I was hearing it correctly. Can anyone tell me what this means? Thank you!
Robert Farrington says
If you completed the rehabilitation program and have been making payments to your new lender, you are safe to file (at least for your student loan debt).
Amber says
Thank you
Lindsay says
I called the TOPs hotline and it says I have one debt that may be offset, does that mean my return will definitely be offset. I didn’t receive a notice. My student loans had been sold and I only finally figured out who had them when I called the hotline.
Robert Farrington says
If you’re in default its pretty much a guarantee your refund will be offset.
Charlene says
Last year my tax refund was taken with the exception of like $1,300. They said it was offset for student loans and they sent me what was remaining. When I filed this year I got an offset code along with my DDD for my return. When I called the offset line it said it was for almost $3,500 for department of education….why is that if they took my refund last year and I got some back after they took it?
Robert Farrington says
If you didn’t take any action on your student loan to get it out of default, your loan spent the year growing, adding collection costs, and more. That small amount they took didn’t cover everything, and so now you’re in worse shape.
You have to get out of student loan default ASAP!
Rebecca says
Hello,
I am currently in a rehabilitation program. The person who I am dealing with in the collection company said since I have made 5 consecutive payments and have turned in all the proper paper work that my loan accounts should be taken out of the offset program. When I call the Treasury Offset number I only hear information from the offset from last year, not this year.
What should I do?
Thank you
Robert Farrington says
You should wait to fully complete rehabilitation and make your first payment on your loan with your new servicer before filing… just like we say in the article above.
Reina Rivera says
They said the same for me fhcann associates they told me after 5
Consecutive payments u are in good standing and can file, but I’m going to call the dept of education just to make sure it’s off
Kaitlin says
Hi, l completred a student loan rehabilitation program in October of 2018. The company that now has my student loans received the letter and dismissal from default december 28th 2018.
I had to call the IRS to get paperwork and had them check my status. They say I am still flagged for garnished refund.
How do I get that off the record ?? I didn’t file my 2017 taxes because of the default. And will be filing both at once. I don’t want to lose all of that refund.
Thanks !
Robert Farrington says
Make your first payment under your new repayment plan. Give it a bit of time. The government shutdown delayed a lot of things…
Kaitlin says
Hi,
My first payment is in forebarance because I’m a full time college student.
But now bc of all of this defaulted loans not updating I can’t get my financial aid. I’ve faxed, emailed, called everyone I can think of.
Can I fax the loan out of default letter to new York state higher education and IRS?
Robert Farrington says
You would be in deferment. That’s fine, just wait until you get your first monthly statement then (whether you have to pay or not).
R. Stevens says
I received a letter that says it’s from US DOE about possible withholding of 15% of my SSI. When I called the DOE they said it was turned over to a collection agency (Coast Professional) I have no had contact with or received any paperwork from. So I called the Dept of Treasury and they said there aren’t any current offsets when I entered my ssn. I’m confused if this is a possible scam. The Department of Treasury Logo is not one on the website or in the correct color. I’m trying to find out if it’s a scam who do I contact? I have called the. Scam number and it lead me to some constant ads they wanted me to sign up for. I just want to get to the right people and I’m on a goose chase for info.
Robert Farrington says
The question is, are you in default on a student loan? If yes, then that makes sense. You can find out who owns your loans by following this guide: How to find your student loans.
Once you’ve found them, you will se garnishments if you’re in default. You need to get out of default to fix this.
patricia says
Does the DOE not put there offsets on the offset number. It says I have no offsets at this time under my social but when I just made my 5th payment through the rehab program they said I have to wait 3 to 4 business days for payment to post and DOE still has a offset on my file and after this payment goes through. they will update with DOE and they will lift offset. I’m just wondering why the DOE offset does not record on the offset number?
Robert Farrington says
We’ve found the offset number to be unreliable. If you’re in default, it’s a guarantee you’ll be offset, but not a guarantee you’ll be listed on the number.
Brandy says
I didnt get notice of an offset. I check my mail religiously
After filing, I found out that I have an offset. I’ve been working on loan consolidation. The consolidation isnt ready yet, but I’ve made my 3 payments and the consolidation is in the process.
If the consolidation goes through before the irs happens to process my tax return, is there a sliver of a chance I could get my refund? If theres a chance, is there anyone I should asknt ohhh call the irs or treasury dept or whoever?
Robert Farrington says
If the consolidation goes through, maybe. But why don’t you just wait another month or two to file your tax return?
Christy Stuart says
I am currently in the process of consolidating my loans that are in default. I called the Tax Offset Program number and it says I have no offsets at this time. How accurate it that hotline? I did receive a letter that stated a possible tax offset would happen. Then I started the consolidation process which isn’t complete yet. Even though the TOP says I have no offsets should I still wait to file for my refund? Also, does everyone do a Rehabilitation first before you get your income driven payment plan? Thanks in advance!
Robert Farrington says
The hotline is 50/50. The letter is accurate.
Complete the process of consolidation 100%, make a payment on your new loan, and then file your tax return.
Shay says
I have a offset but I paid all of my federal loans off the offset is for state loans they already took my state’s tax refund so are the going to tax my federal to
Robert Farrington says
Yes, they can go after Federal payments like a Federal tax refund too.
Darby says
I’m alittle confused. I am currently on a rehabilitation program for my defaulted student loans. I was aware that they could still possibly take my Federal refund, which was ok with me considering the amount I am supposed to receive is well over the amount owed. Today I checked on my state return and it says I will not be getting a refund. When calling the number to check about an offset it said that my state refund was taken and applied to my to DOE. Can they take your state taxes for a federal loan?
Robert Farrington says
Yes, they can take everything. And offsets typically don’t go to cover what you owe on the loan – they go to collection costs and fees, accrued interest, and more. If you don’t take action to get your debt out of default, this will keep happening.
Tommy says
I just started a rehabilitation program for my federal student loans. I have made my first payment and they said to call the Offset number to check the status in a few days (this was last week.) I just called the number and it says I have no Offset. Am I ok to file my taxes or would I have to wait a couple months when the rehabilitation is complete?
Robert Farrington says
Our recommendation is to fully complete your rehabilitation if you want to get your refund. Anything else is a risk.
Shay says
Hi is there anyway I can stop them from taking my federal taxes they took my state last year to that’s when I found out that I had a offset what can I do so they won’t take my federal taxes and why didn’t they just take the money when I paid off my federal taxes back in 2007
jeremy parks says
My student load was in default and I didn’t get a return because they took it. Do I get credit towards the total amount owed after they have taken my money? What happens with the money I was supposed to be returned?
Robert Farrington says
The money they took goes towards your student loans – but most (or all of it) will go to collection costs and fees, and accrued interest. Rarely will you see any actually go to your loan balance. Your loan will still continue to grow and be a problem until you get it out of default.
Chris says
My loans are in default and I call the númber for offset and even called the 3rd party and I still don’t have an offset and a lady told me that on March 10 I will know if I am in offset and that I am ok to file my taxes as long as it’s before March 10th is this true or they will still take it away even though I have no offsets yet
Robert Farrington says
Your risk is very high. If I was to gamble on your scenario, I would put all my money on you having your tax return offset and taken.
A-Teague says
How can I get a data sheet of all of the past taxes that have been taken to pay off my loan versus how much is left and also to see if it is going to the debt itself instead of just the interest? I’m trying to figure out exactly how long it will take to pay it off entirely. I have financial hardship, not documented but would like to get out of debt!
Robert Farrington says
You can use the NSLDS to find your loan information and balances: https://thecollegeinvestor.com/22787/nslds-and-student-loans/
Likely almost none of what’s been taken from your past tax returns has gone to your loan. In most cases, it all goes to collection costs and fees, and accrued interest. As a result, most people’s loans continue to grow (and so the fees and interest get bigger as well).
The only way to stop the cycle you’re in is to rehabilitate your student loans and get out of default. It might be much more affordable than you think… read this: https://thecollegeinvestor.com/22174/student-loan-default/
La Trica says
I’m currently on a plan and just got informed that they are taking my taxes what do I do next?
Robert Farrington says
You finish rehabilitating your loans 100% before you file your tax return. That’s what we say in the article above…
Cheyenne c. says
I am in a payment agreement with the debt collector of my student loans and they take money monthly. But yet all my refund was taken. Can they do that? I have a letter stating them taking money out of my account?
Robert Farrington says
Yes, until your account is out of default, they can totally take your government payments. That’s why we recommend waiting until your out of default before filing your taxes.
If you’re just on a payment plan, not rehabilitation, this will continue to happen.
Andrea says
So here’s my situation. I have two different loan holders. I have completed the rehabilitation process with one, and am in the middle of the consolidation process with the other one. A couple of weeks ago, my SSN was showing up in TOPS as possible offset from the DOE. Now I’ve checked back every day, several times a day, since Thursday and it’s saying there is no debt associated with my SSN. As I stated, I’ve completed rehabilitation with one holder of multiple loans, and I’m in the middle of the consolidation process with the other one, but it’s not complete yet. Since TOPS showed a debt but now it doesn’t, is it safe to file my taxes? I’m looking at a RAL because I had a situation arise that is requiring me to have about $500 by the end of the week. If I didn’t need it so bad, I would just wait until the consolidation was complete too, just to be sure. But I really can’t wait anymore, so I’m hoping TOPS is accurate.
Robert Farrington says
I would wait until your consolidation is complete to be safe, as we’ve seen plenty of people not have an offset showing see their tax refund taken (see the comments above – there are some stories there).
If you want a RAL, check this: https://thecollegeinvestor.com/18859/early-tax-refund-anticipation-loans/
You might also just go the route of a personal loan: https://thecollegeinvestor.com/22621/best-personal-loan/
Andrea says
Thank you for the help and quick response, and all the help you lend on here! Just one more thing… I called the IRS and the Bureau of Fiscal Services, and actually spoke to a person at both, both saying I’m good to go to file my taxes. I also called the loan holder of the one’s I’m trying to consolidate who says I am “certified” for an offset. The only one I haven’t called is the Dept of Edu. First, what does certified mean. Second, why is the loan holder showing it but not the IRS or the BFS? Is it possible it just hasn’t made it to them yet and the previous offset was for the one’s I successfully rehabilitated?
Nevertrustcolleges says
Ok , so I have many questions! Back in 2013 I was told for my daughter to get more of a loan for her stafford loan I would have to apply for a parent plus loan . I was reassured that I would be turned down since my husband was on disability and only worked part time . Needless to say that was a lie . This happened every year . So hear I am in major and I mean major debt for parent plus loans !!! Which should be illegal to begin with , seeing how we have no income other than my spouses and now my credit is total garbage . The past 3 years I have been on the income driven plan with $0 payment plan . I worry every year that they will take my taxes that we literally live off of. Is there anyway I can get the loans dropped since my spouse receives disability and will be on it for his entire life ? Any help is greatly appreciated!
Robert Farrington says
Here’s our guide to Parent PLUS Loans: https://thecollegeinvestor.com/17101/options-if-you-cant-afford-your-parent-plus-loans/
If you’re on an income-driven repayment plan, and your monthly payment is $0, you’re not in default. They won’t take your tax refund. Furthermore, as long as you certify your income annually, you’ll eventually get loan forgiveness: https://thecollegeinvestor.com/11856/secret-student-loan-forgiveness/
The bottom line is, you’re doing everything right and stop stressing about it.
Emily G says
I never received a letter in the fall about my federal being taken. My federal tax return was taken last year, but I entered into a rehabilitation program for my defaulted loans in January 2019. And I haven’t received a letter about the department taking it again. Should I expect them to take the refund again, and can I fight them taking the refund since I’m currently enrolled in the rehabilitation program?
Robert Farrington says
They will take it until you complete the rehabilitation program and get out of default.
Lizzy says
I just noticed all of my federal refund will be taken because of default. I just started working again in December. We had filed for divorce in August, but have received no help from him for our kids til this day. All of the income from takes was for my ex. We filed married filing jointly. I also have extreme hardship since I was unemployed for so long. I started a new repayment plan and the first payment has been made, but it was made a few days after I filed. I desperately needed the refund. Would the best way to get it, is to go back and get his portion back since he was primarily the one working? I have 3 kids and needed that to catch up on bills and not lose my house. Any help is appreciated.
Robert Farrington says
There’s no way to get it. If you’re rehabilitating your loans, you need to complete this process first – 9 payments, then make your first under your new repayment plan. So you’re looking at 10 months before it’s safe to not see your tax return offset.