Will your tax refunds be cut if you have your student loans garnished?

In the United States of America, there was a recent legislation that passed aimed to help all people with student loans. As one of the best ways for Universities to become wealthier was by offering their student loan program. Education in American society is amongst the most expensive around the world. Defaulting on a federal student loan meant that the Government could simply take your tax refunds in order to help cover what you owe for those student loans. But in recent years, the Government did pause this practice and other collection activities. What happensns to borrowers who are trying to get their tax refunds without the government taking their money to pay for that student loan.

How do I know if my tax return will be garnished?

There is a better way to find out if your tax return will be garnished by the government or not. The good news is that not all debts are subject to a tax refund offset. This will determine if an offset will happen on a debt owed that is not federal tax. At this point, only federal student loans in default can subject you to a garnished tax refund. Typically, these unpaid loans enter default after 270 days since the last past-due payment. But after 90 days of past-due payment, the loan servicer will report your case to the three major credit bureaus. Private student loans are not eligible for tax refund garnishment.

Every time your tax refund is subject to garnishment, you will get a letter from your loan holding letting you know you have been referred to the Trasury Offset Program. This is the U.S. Treasury Department’s task force that deals with taking federal payments to cover delinquent debts owed to government agencies. Other areas they cover are past-due child support payments and other types of loans. Before your tax refunds are seized, your student loan holder will send you a tax offset notice.

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