How Can I Stop Student Loans From Taking My Taxes?

• If your federal student loans are in default, your income tax refund may be garnished in 2025 through the Treasury Offset Program. The IRS could seize your refund and apply it toward your unpaid student loan debt.

• You can check your default status by reaching out to the Default Resolution Group, contacting the Federal Student Aid Information Center, or reviewing your account on StudentAid.gov.

• Your options to get out of default are loan rehabilitation and consolidation. Loan rehabilitation requires nine consecutive payments based on your income, while consolidation resolves default faster but takes 6–8 weeks to process.

You can stop student loans from taking your tax refund by getting your federal student loans out of default. Only defaulted federal student loans are eligible for tax refund offsets. Private student loan lenders like Sallie Mae and College Ave don’t have the authority to seize your tax refund.

Here’s what happens. If you default on federal loans, such as Direct Loans, FFEL Loans, or Perkins Loans, the government can collect on the debt by taking your tax refund. This process called a tax refund offset, is completely legal and does not require a court order.

Good news—options like loan rehabilitation or consolidation can get you out of default and save your tax refund. Keep reading to find out how these solutions can work for you.

Related:

• How to Stop Student Loan Wage Garnishment

• Can Social Security be Garnished for Student Loan Debt?

Federal student loans could take your tax refund in 2025 if they’re in default. The Biden Administration’s 12-month on-ramp to repayment program, which ended on September 30, 2024, helped many borrowers avoid default by temporarily pausing penalties for missed payments.

Here’s what to know about default and your refund:

• It takes at least 270 days (about nine months) to default on missed student loan payments.

• By January or February 2025, if your loans were in good standing when the payment pause ended, you’d likely be only four to five months past due—not long enough to default yet.

But timing matters. If your loan enters default later in the year, any tax refund processed after that point could be intercepted to repay defaulted loans.

If you’re unsure whether you have defaulted federal student loans, you can check your account at StudentAid.gov or contact the following:

• Default Resolution Group at 800-621-3115

• Federal Student Aid Information Center at 1-800-433-3243

A student loan tax offset occurs when the federal government seizes your tax refund to repay defaulted federal student loans. Through the Treasury Offset Program, your refund—including credits like the Child Tax Credit—is applied to your loan balance, covering principal, interest, and collection fees.

This process begins when your federal student loans go into default, which happens after nine months of missed payments. Defaulted loans are transferred from your loan servicer to the U.S. Department of Education’s Default Resolution Group, which notifies the Department of Treasury to flag your account for tax refund garnishment. Once flagged, the IRS can withhold your refund.

Note: If your loans are not in default or are being repaid under an Income-driven plan, the IRS will not take your tax refund. Borrowers in good standing can still receive their refund, even if they owe federal student loan debt.

Not all debts lead to a tax refund offset, but federal student loans in default are among the common reasons. To find out if your tax refund is at risk:

• Contact the Treasury Offset Program (TOP): The TOP call center at 800-304-3107 (TTY/TDD: 800-877-8339) provides information on whether your refund is flagged for garnishment.

• Check Your Loan Status Online: Log in to your account at studentaid.gov to see if your loans are in default.

• Look for Notifications: Borrowers are usually notified by mail before a tax refund offset happens. This letter will include details about the offset and steps to dispute it, if necessary.

Even with defaulted loans, some circumstances can impact whether your tax refund is offset. Here are three examples:

1. Outdated Contact Information: Offset notices are sent to your last known address, but if you’ve moved and missed the notice, the offset can still proceed. To avoid surprises, update your information with the Default Resolution Group and check your account status regularly.

2. Recently Resolved Default: If you consolidated or rehabilitated your loans but your tax refund is still flagged for offset, delays in updating Treasury records could be the issue. Call the Default Resolution Group to resolve this quickly.

3. Loans Currently in Dispute or Appeal: If you’re actively disputing the default status of your loans or appealing a decision with the Department of Education, an offset may still proceed unless flagged in the Treasury system. Always confirm with the Default Resolution Group if your dispute temporarily halts offset actions.

You have four main options to get your federal student loans out of default. Each option works differently and has its own timeline for stopping a tax refund offset:

1. Loan Rehabilitation: You agree to make nine consecutive monthly payments based on your income. Once completed, your loans are removed from default. But, your tax refund can still be taken until you’re fully enrolled in the rehabilitation program and make several payments. Read more about the Student Loan Rehabilitation Program.

2. Loan Consolidation: You combine your defaulted loans into a new Direct Consolidation Loan. To qualify, you must agree to repay the new loan under an income-driven repayment plan or make three consecutive, voluntary, on-time payments. Consolidation is typically the fastest way to get out of default. Read more about How to Consolidate Defaulted Student Loans.

3. Repayment in Full: You pay the total balance of your defaulted loans, including interest and collection fees. This immediately resolves default, but due to the large amounts owed, it’s often not a realistic option for most borrowers.

4. Compromise for Less Than Owed: In rare cases, the Department of Education may agree to settle your defaulted loan for less than the total amount owed. This process requires negotiation and approval but can stop offsets once finalized.

Related: Can You Settle Federal Student Loans?

What About the Fresh Start Program?

The Fresh Start program, which ended on October 2, 2024, allowed borrowers to immediately exit default and regain access to benefits like income-driven repayment plans. Unfortunately, this option is no longer available.

For now, the fastest way to get out of default is through loan consolidation, assuming your loans are eligible.

Loan rehabilitation is the second-fastest option, but federal tax refund offsets may continue until you’re fully enrolled and make progress on the required payments.

Stopping a tax refund offset depends on how you get out of default:

• Loan Rehabilitation: After enrolling in the program, you can ask the Default Resolution Group to remove your name from the offset list. This process is often immediate or takes a few days.

• Loan Consolidation: Stopping an offset through consolidation takes longer—about 6–8 weeks—because you need to fully complete the consolidation process before your loans are officially out of default.

In either case, it’s a good idea to contact the Default Resolution Group and confirm they’ve updated your status with the Department of Treasury and the IRS.

If you’re married and file taxes jointly, your spouse’s portion of the federal tax refund could also be garnished to repay your defaulted student loans. But, you may be able to protect their share by submitting an injured spouse allocation form (IRS Form 8379).

This form can be filed with your tax return or submitted afterward if you weren’t aware of the offset. You generally have up to three years from the due date of your original tax return to submit this form and request a refund of your spouse’s share.

For joint state tax refunds, your spouse’s portion is protected depending on your state’s rules. Check with your state’s taxation department to see if similar protections apply.

Related: Is My Spouse Responsible For My Student Loans?

You can get your tax refund if it was already taken, but it’s difficult. You can try the following:

1. File for Extreme Hardship: You can request a refund by proving that losing your tax refund creates a severe financial hardship. But hardship refund requests are rarely granted.

2. File for Bankruptcy: If you act quickly (usually within 60–90 days), certain provisions of the Bankruptcy Code may allow you to recover the offset. Keep in mind that recovered funds may be redirected to repay other creditors unless protected by bankruptcy laws.

Reclaiming your tax refund after an offset is technically possible but often complicated, requiring legal knowledge. If you’re in this situation, it’s a good idea to consult with a bankruptcy attorney or a student loan expert to explore your options effectively.

Related: Student Loan Tax Refund Hardship Guide

As tax season approaches and you know you haven’t paid your student loans in a while, check whether your account is in default—especially if you’re expecting a refund.

Getting out of default not only protects your tax refund but also stops other consequences like wage garnishments or Social Security benefit offsets. Resolving default restores your eligibility for loan forgiveness programs, deferment, and forbearance, and it can even help improve your credit score over time.

If you’re unsure about your loan status or need guidance on the best option for getting out of default, book a consultation with a student loan expert today. Taking action now can save you from unnecessary financial stress later.

Related reading:

• Will student loans in default be forgiven?

• Defaulted student loans 20 years ago, what to do?

• What happens when a private student loan is charged off?

• Can student loans take money from your bank account?