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Q: How can I stop student loans from taking my taxes?

May 15, 2020

You can stop student loans from taking your tax refund by getting your loans out of default. There are three ways to do that:

  • negotiating a federal student loan settlement
  • applying for a Direct Consolidation loan
  • entering into the loan rehabilitation program

Most student loan borrowers cannot afford a federal student loan settlement. They’re expensive. You’ll typically settle a federal student loan for no less than 85% of the current loan balance. And that money’s payable in 30 to 90 days.

Loan consolidation gets you out of default fast. It takes less than 3 months for the loan consolidation process to complete. But when you consolidate, the collection fees and accrued interest are capitalized. Your loan balance could balloon as a result.

Read Full Article: How to Get Out of Federal Student Loan Default Fast

Loan rehabilitation gets you out of default in about 9 months. To be 100% sure your tax refund won’t be offset, you would want to wait until you complete the loan rehabilitation program before you file your tax return.

#1 Can filing bankruptcy stop tax offset?

Filing bankruptcy can stop your tax refund from being offset for defaulted student loans. Bankruptcy law has an automatic stay from collection activities. A tax refund offset is a collection activity. If you file your bankruptcy case before the money is deposited, the automatic stay should protect your refund.

So act fast when you get this debt offset notice:

Your refund has been applied to a past due obligation such as child support, another federal agency debt, or state income tax. the bureau of the fiscal service (bfs), who issues irs refunds, will send you a notice informing you of the reduction.

Click here to read the Complete Guide to Student Loan Bankruptcy

#2 Can the Department of Education take my tax refund for unpaid student loans?

Your tax refund can be offset for student loans only if you’re in default on a federal student loan. To prevent the offset from happening, you’d want to get out of default before filing your taxes.

Read Full Article: How Do I Know if Student Loans Will Take My Tax Refund

#3 If my wages are being garnished for student loans will I get a tax refund?

Your tax refund will likely be offset if you’re being garnished for student loans. So long as you’re in default, the government can use all of its collection powers to recover the student debt you borrowed.

Read Full Article: The Government’s Collection Powers for Federal Student Loans

#4 How long does it take for a tax offset to be removed?

For student loans, you’ll typically remain on the tax offset list until your loans are out of default.

Depending on whether you get out of default through loan consolidation or loan rehabilitation, it may take 2 to 10 months to get removed from the tax offset list.

#5 How do I find out who offset my tax refund?

To find out who offset your refund, you can call the Treasury Offset Program at 800-304-3107. You can also use the Department of Education’s National Student Loan Data System at studentaid.gov.

After you log in with your FSA ID, you can use the NSLDS to track down which agency offset your refund.

Your state refund may be offset if you owe a student loan to a state agency like New York State Higher Education Authority.

#6 What if I never received an offset letter?

A letter is supposed to be mailed to you before the first year your refund is offset for student loans. If you didn’t get that letter, it’s likely either because:

  • This is not your first tax offset or
  • The agency that offset your refund has an old address for you

Can you challenge the offset because you didn’t get the letter? Sure. But that challenge will likely fall on deaf ears.

#7 How to get your tax refund back from the Department of Education?

You may be able to get your tax refund back from the Department of Education if you’re facing eviction or foreclosure.

Here are the steps to take:

  1. Confirm the Department of Education took your tax refund. Call the Department of Education’s Default Resolution Group at 800-621-3115.
  2. Request an application to have your tax refund offset reversed for financial hardship.
  3. Review the hardship requirements. You may need to be in a voluntary repayment plan like the loan rehabilitation program to get your refund back.
  4. Gather the necessary documents. To get your refund back, you have to submit a hardship request with documentation showing the eviction or foreclosure is imminent. Typically, you’ll do that by providing notarized letters from the landlord or mortgage company or official court documents.
  5. Confirm the Department received your documents. The Department of Education has been known to say they haven’t received all the paperwork you sent. So ask a representative to go through your paperwork to confirm it’s all their and no other paperwork is needed.
  6. Wait for a decision. After you submit your paperwork and confirm receipt, the only thing you can do is wait.

Getting a refund reversal for hardship is extremely hard.

Unfortunately, the odds are that you likely won’t get refund back. And even if you do, you’ll likely only get some of it back.

#8 Is there a student loan tax offset hardship refund form?

There’s no universal form to get your tax refund back as a hardship. You have to contact the company that took your refund to find out:

  • What form they want you to complete and
  • What information you need to provide

Read Full Article: Student Loan Tax Refund Offset Reversal Forms

Flat lay of tax refund hardship application for the Department of Education.

#9 How long does it take to get a tax refund after offset?

It takes up to 8 weeks to get your tax refund back after your hardship request has been approved. There’s no way to speed the refund process up. All you can do is wait.

71 responses to “Q: How can I stop student loans from taking my taxes?”

  1. Great suggestions . For my two cents if others want a ED Economic Hardship Deferment Request , my business used a blank version here https://goo.gl/GhGyHC.

  2. Hello:
    I recently learned that I have defaulted students loans. In 2014 and 2015, my tax returns where both withheld for offset payment to the U.S. Department of Education of $8,397.51 (respectively $2,606.54 for 2014 and 5,790.97 for 2015)!

  3. I have filed a hardship request last year and we’re I have my student loan they ignored it completely I have a 2 year old child and have struggled the past year we have since lost our home have a bad vehicle unsafe living back with my mother and have been having health issues beyond stressed and could use my refund for a better vehicle and place to live of our own

  4. Question I check my credit score on credit karma now the student loan is on there now the loan they say i owe is over 4,000 but when I look at my credit n look at what’s in collection it saying it 1200 what I owe now this doesn’t seem right to me I only went 1 semester n had to stop because I had no way back n forth y is it so different than what’s showing on my credit

  5. I have defaulted student loans from 2015-2016 now this year they have taken my taxes which was $1200 but right before they took it I set up a payment plan with action financial to do a rehabilitation program. So I was wondering how I go about trying to get my taxes back for this filing year 2016 sense I set up a payment plan?

    • The repayment plan you set up wouldn’t necessarily have stopped the tax offset. You can stop the offset if you request a written agreement to debts within 20 days of the date of the notice of intent to offset. After you get the repayment schedule, you must make the first payment by the 65th day after you got the notice.

      To get your refund back, you may have to contact the Department of Education and claim that not getting the refund caused you an extreme financial hardship.

  6. Just received offset notice for Student loans. Spoke with Fedloans and setup a deferement on my loans and an income repayment plan. I sent in a hardship letter back in February when I found out my taxes were being held with this help with getting my refund or am i just out of luck?

    • Without knowing more, I can’t say whether you’re out of luck. It seems as if your refund has already been offset for a defaulted student loan. There are three ways to try and get that money: (1) request a financial hardship; (2) if you’re married, file an injured spouse form to get your spouse’s portion of the money back; and (3) file bankruptcy and use the bankruptcy laws to recoup the garnishment.

      • I didn’t find out my taxes were being held till my tax person told me in February. Than I sent in a hardship request list and all documents and than on Monday I got a letter from the offset office saying they were keeping my taxes. So I don’t know what to do I’m so deep in debits from payday loans to pay bills and now my daughter for notice if her rent being late at school. The lady I spoke to at depart of ed said I cldnt file a hardship or request review cause it was past the deadline to file request but I don’t see how and I just got on Monday and sent in paperwork back on February..

  7. My daughter-in-law’s identity was stolen and the thief took out over $10k in student loans. Once she received a letter from a collection agency, she filed all paperwork to stop any offset. She was not notified that her 2016 refund was going to be withheld until she was waiting for her refund to get into her bank account. She has 15 days to try and get the offset reversed before she faces homelessness with her two kids. (she was going to use refund to move and get an apartment) There is even a special agent of the DOE in Colorado that knows everything about the identity theft case, but will not assist us in expediting the reversal of offset with the people at DOE in Texas. Such frustrating bureaucracy. How do you gain any traction in situations like this? Everything step is “45 days”. You know if the right people contact the DOE and tell them to “flip the switch” and reverse the offset, they can. Desperately searching for guidance.

    • You might not want to hear this but for these things take time. I urge you to contact the DOE and file a financial hardship request with them and stress that your daughter in law is facing eviction and has two kids. Another option is filing bankruptcy and trying to get the offset money back. The problem with that, of course, is that filing bankruptcy costs money. And that’s money that she might not be able to get.

      It’s unfortunate that this has happened to your daughter-in-law.

  8. Why are time lines for processing hardship refund so lengthy, someone dealing with true hardship does not have 60 days to wait for them to review. what can be done about the lengthy wait?

  9. I had my entire tax return of $8,000 applied to my school loans, I was waiting on my tax return to get current with my ppl utility bill and get a place to stay. I last year I set up a rehabilitation plan but recently found out it never went through because I was supposed to sign a document. I’m in the process of setting up another one now. Do you have any advise for me to get my refund back, I called them and they said since I was not getting evicted or foreclosed I can’t send in a Hardship form but I’m homeless and I’m working at a temp job. Any suggestions for me Stanley Love Tate III ? Can I write the Dept of Education and the Dept of Treasury a letter?

  10. Hello, let me first say that I really appreciate you helping people on here! Now my question is…I sent in my hardship offset request reversal to the Dept of Education, so how soon til I hear back? Should I call and confirm that they received it? I guess, I’m looking for the next step from you. 🙂

  11. My student loans were in default and my tax refund was taken. I was in the process of consolidation when my tax refund was sent to the Department of Education. When they got the check from my taxes the loan was consolidation but instead of refunding me they sent the refund to the place that consolidated my loan. Is this legal? I need my refund. Is there a way to get my refund back?

    • Sorry for my delay in responding. I must’ve missed this. I’m sure you’ve already answered this question but I reply anyways in case someone else has the same question.

      Yes, this is likely legal. And yes, there may be a way to get your refund back. You would have to contact the Department of Education and ask for a financial hardship.

      • If you state your reason for hardship is that you are homeless, do you know how much of your offset they may refund to you? Is there a percentage or is it the entire amount?

        • There’s no set percentage they will refund. Documented homelessness may be a strong enough reason to get 100% refunded. But I can’t say if that will happen. The Department hasn’t disclosed a scale that I know of.

  12. Hello – Thank you for providing a source of information that helps with navigating this very convoluted system! I filed my taxes early this year as I rely on my refund to help support my family throughout the year. I did not receive an offset notice prior to filing my taxes, It was several weeks after my taxes were completed, submitted, and refund amount approved (I filed using TurboTax), that I logged onto my Turbo Tax account and discovered my Federal Tax return was being offset due to my student loan debt. Because I have multiple student loans that have been sold off to collection agencies I have not been able to track down which loan my $8k tax return was applied to. I am now in the process of consolidating all of my student loans but would like to verify the balance I am consolidating reflects the offset payment of 8k. My question for you is, sorry for long intro, Can I file a hardship and have the offset reversed back to me so I can complete my student loan consolidation? I truly appreciate any help or information – Thank you –

  13. In March 2017 I began the process of rehabbing my SL’s.
    I received an income offset notice (fixed income) from 4/19. I challenged this because of financial hardship and won.
    I then received a tax return offset letter dated 6/23 (I had filed a previous years return, needed cash, paycheck to paycheck)
    To my understanding at the time, perhaps I was misinformed when I contacted the department, I could not challenge this unless property was in forclosure. The return was offset.

    I really need this money. Process of rehab was well underway with 4 payments made and current. Loan is now rehabbed (10 months paid and current)
    What is the best way to appeal? Which Department would I appeal to? Is there a form or Begin with a letter?

  14. I already have a wage garnish from my paycheck, and now find out all of my refund is being taken also! Why both?! I am ALREADY financially drained, is there anyway to stop the offset of my tax returns, since there is already a wage garnishment in place?

    • The only way I can think of would be to file bankruptcy, use the applicable bankruptcy exemptions and the automatic stay to try and get the money returned to you. Other than that, the offset will occur and then you will file a financial hardship to try and get some/all of the money back. If you filed with your spouse, you may be able to get their portion returned as well.

  15. Greetings and thank you for the information. I notice that the P.O. Box for the Hardship information is different from the sample letter by one number. The letter shows P.O. Box 6227 and the send documents too address states P.O. Box 5227; which is it? Thank you for the corrections and confirmation.

    • Never mind, I read the earlier comments and may have had my answer in a previous comment, but the sample letter is still in error.

      • Did they get it cause I have:
        US Dept of Education
        Default Resolution Group
        P.O. Box 5609
        Greenville, TX 75403-5609

  16. Hello I just found out that my whole tax return was taken on 2/23/18 the next day I received the letter. I’m a single mom of three I need that money for throughout the year. The us department of education is one that the money went to, I’m not sure where on the website I can find the hardship form… can someone help me out with that? Please. Is it a form like the ecmc ? If they do not have a form do I write a letter with supporting documents? What document is needed if you are homeless?

      • I swear last question! Do I need to have address and phone numbers on paperwork ? Are they going to call them and verify? As far as my car company and payment behind ?

        • I also had my whole refund offset and I contacted the DOE. They are sending me a Hardship Packet in the mail that I will receive in 7 to 10 business days, once they receive it back with all supporting documents they make a decision with in 10 days and if a hardship refund is granted, should receive with in 30 days… So call Department of Education 18006213115

          • Thanks I did that.. I am also waiting for the hardship packet. I also heard they only refund how much you are behind in your supporting documents.. I will be grateful for anything at this point, but I am just behind 1800 and my refund was over 10k -__- . I wonder if that’s true.

          • I had my entre refund taken for student laws I sent in all required documents and within 3 weeks I called doe and I been approved they would not say how much but only if been approved I’m wo seeing how lo g after approval it takes to release my money

  17. I am in the same situation as Stephanie. But they have also been garnishing my wages. I had already signed contracts to reconsolidate and that was prior to 2/16/18. I was not aware of the tax offset prior to it happening. Is there, if anything, that I can do? I am a single mother of a disabled child that is limited to number of hours I can work because of expense of special needs childcare. I count on my tax return to help with expenses of daily living.

    • Who is your loan through ? Hopefully we can get some answers I am trying to get the ball rolling first thing in the morning

      • Who your loan is through doesn’t matter as much. It all ends up with the Department of Education. Some of you have been dealing with private collection companies like Windham. Those companies don’t approve or deny your hardship request. The Department does.

    • Hey Courtney, you will need to document all that info (disabled child, limited hours, etc.) in your letter to the Department. You need to show that you have exceptional financial issues. As for the consolidation, it sounds like the problem is that you filed your return while you were still in default. Yes, you had a consolidation application pending but it wasn’t complete.

        • For the DOE, there’s no separate form. There is a form to request a hearing. But that form specifically says not to use it if you cannot afford to pay the debt. In that instance, you’re told to write or call the contact listed on the loan statement. https://uploads.disquscdn.com/images/4b45fcb2e1f8d783ea1d954f934abf8c01999957beba25ca878d016932e58f5c.jpg https://uploads.disquscdn.com/images/b31e44f303d688acf990e1eab3a89d011897b7cbc88362ce37562a774c06c936.jpg

          • I just sent in:
            1. a notarized right to quit notice (eviction warning),
            2. hardship packet,
            3. offset notice,
            4. Bill disconnection notices (3),
            5. proof of paying loan rehabilitation for 5 months now
            (forgot a copy of my lease and my notice from my landlord was notarized at a UPS store).

          • How did you notarized the right to quit notice; I couldn’t and all the notary offices I visited with my eviction notice; they turned me away and said that they couldn’t notarise legal documentations that where already signed by someone else and that didn’t have a spot dedicated to notary stamp and signature; that is where is the catch; they set you up for failure no matter what you provide to prove your hardship; it’s really feels like a kind of yakuza racketeering that this department of Education under this administration is engaging in. And the Ombudsman office are just another organization that is just collecting free money for the government to pay themselves there are really not helpful at all in this process all they do is directing you to the 3rd party debt collector that the dept of education has contracted to make a payment arrangement and they really are not helpful at all in helping with navigating treacherous hardship process; I am really looking if there could be some legal venues to challenge this. And the crazy thing is that if you’re aren’t lucky enough to have you refund taken after you’re already homeless they don’t consider being homeless as proof of hardship you have to be in the process of being evicted which is just ridiculous, cruel and doesn’t make sense at all and they are getting away with stuff like this because millennials don’t go to the voting boot.

  18. I wanted to share some helpful information. I too am going through this. I was given the run around for 3 days by Navient, whom works of behalf of Great lakes, whom purchased all Northwest Education Loan Association loans. Navient was less than helpful, I got in touch with the US Dept of EDU and they gave me the Number for the Ombudsman for Great lakes. The ombudsman was super helpful and was able to explain the hardship process and gave me some hope. This maybe the ticket here. Find out who the ombudsman is for your guarantor and tried to get assistance through them, they are there to help advocate for us. Here is a link that shows the ombudsman contact for a lot of guarantors. http://www.studentloanborrowerassistance.org/resources/referral-resource/ombudsman-programs/

    • Thank you Alicia. I have contacted the Attorney General for both the DOE and the DOT. They are not help. I cant even get the DOT to sent me the offset letter to apply for a hardship. I will try the Ombudsman, Thanks again,

  19. I am homeless after being illegally evicted from my dad’s home recently after moving from TX to MI in Dec 2017. DOE offset my 2017 tax refund and I called them about a hardship because I am homeless. I have a police report but have not filed in a civil court due to being homeless and without money. The DOE adviser told me I did not qualify because I do not have an eviction notice or foreclosure notice. DOE would not even send me the form. Are the qualifications different between the DOE and the ECMC??? The ECMC form included homeless as a hardship.

    • The problem is that the Department reviews hardship requests at their discretion. The Department looks for extreme hardship, which they define by example as facing eviction or foreclosure. See question 17 here: https://ifap.ed.gov/eannouncements/attachments/ConsumerAdvocateFAQs.pdf

      ECMC has a different standard.

      You may be able to get that some of that money back if you quickly file bankruptcy. There’s bankruptcy law that allows you to get some of that money back.

      • I see. Well I am not in a position to retain a bankruptcy attorney unfortunately. I filed a small claims for unlawful eviction in civil court. I do not have a foreclosure own no property here or an eviction notice thats the whole point of filing with courts. Is ot a waste of time to apply for the tax offset hardship

        • Have you checked to see if your state has a legal aide attorney that can file bankruptcy for you usually free of charge.

          • I have been trying to locate an attorney to help me with bankruptcy to file for free but I have not had any success. Is it possible that you can recommend an attorney here in Michigan?

            Thank you for you help!

            Warm Regards

  20. I just sent in:
    1. a notarized right to quit notice (eviction warning),
    2. hardship packet,
    3. offset notice,
    4. Bill disconnection notices (3),
    5. proof of paying loan rehabilitation for 5 months now
    (forgot a copy of my lease and my notice from my landlord was notarized at a UPS store).

    • Hey India, I can’t say. I wish I controlled the process. If so, I’d be like Oprah: “you get a refund. you get a refund.” But sadly, I don’t.

      In my experience, they typically look at that information and try to confirm it before deciding what to do about the refund.

  21. Stanley, hello. Thank you so much for helping us with this super confusing process. I personally would not be able to afford an attorney to guide me through this process so the fact that you are providing advise free of charge is so kind. Thank you!!!!!
    My question is regarding page # 2 of the hardship packet from DOE ….“Statement of Finacial Status – TOP Hardship IRS”. After learning my refund would be offset, I contacted DOE who informed me that the debt now belongs to National Recovery Systems. I called and after discussing my options and my financial situation the rep stated I was eligible for the rehabilitation program. I enrolled and am now paying a low monthly rate toward my student loan debt. So, why is it still necessary for me to submit this financial breakdown again to DOE? The form is confusing because it says that I am not required by law to complete this but it informs DOE how I plan to repay my debt and I should not leave any answer blank lol. Sending detailed documents of my loan rehab enrollment should be enough. My worry is if i turn in this page some of the information I provide may cause them to not approve my request for refund. Do you know if NOT submitting the completed form will impact the decision? I would feel much better sending them a copy of loan rehab enrollment as evidence of my plan to pay off my debt. Thank you again, Stanley

    • Think about your situation as two different processes. Each has its own procedures. Each has its own supervising authority. The process for rehabilitation requires you complete a form and turn over certain financial information to get approved for the program. The hardship application asks for similar information but using a different form.

      I know this process is confusing and, at times, scary. But you’ll get through it. You sound like you’re on the right path.

  22. My hardship was approved as of 5/23/2018 does anyone know the length of time after the approval that it takes for my return

  23. Funny how my plea for help on here got counted as spam but I guess nobody has the answers for everything. It is what it is. Anyway, Idk if this has been mentioned but after you make a deal with them they do give you your money back after you honor your contract with them. Now that’s fair!

  24. I received a letter last year saying that my federal refund was being given to the higher education for my student loan. How do I get a copy of that letter?

    • Hey Melody, to get a copy of the letter, try contacting the Department of Education’s Default Resolution Group at 800-621-3115.

  25. We received a letter over a year ago that, as I understood it, meant that all IRS tax returns, which had been offset for my student loan debt, were retroactively being applied to fees and interest, not principal. It then noted that my $2500 student loans (almost there!) were now a $56,000 debt (since, retroactively, the principal had never been reduced). I thought it was a mistake, or that I misunderstood, or that it was some sort of scam. But a few weeks ago, I received another letter referring to the same larger debt (from a private credit agency working for Dept of Education?? Can they do that????).

    Have you seen anything similar with anyone else?

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