Tax Offsets

Most of the federal student loans become defaulted if payment is not made for more than 270 days. Other types of loans may even default earlier such as delinquent loans. Many people who are struggling with their loans may think that 270 days is a long time. However, they must remember the consequences of defaulting on student loans, which include wage garnishment, tax offsets, loss of eligibility to get any federal aid, and loss of forbearance and deferment options.

These collection measures taken by the lender affect the borrower’s credit report and their reputation in the society. The long-term effects can be serious; you may be denied home loans, credit cards, or apartment leases. Therefore, it is very important to understand the consequences of defaulting on student loans before applying for one.

What is a Tax Refund Offset?

One of the several methods used by the Department of Education (DoE) to collect student loan debts is Tax Refund Offset. In this method, the US Department of Treasury can garnish or seize the borrower’s federal and state tax refunds to pay off their student loan debt. If the borrower and their spouse have filed a joined refund, the Internal Revenue Service (IRS) can withhold the tax refunds of borrower’s spouse as well. The IRS is bound to send a notice to the borrower to inform them about the proposed offset and provide them an opportunity to review their loan records.

The Treasury Department can collect several different types of loans through tax refund offset such as loans given by the DoE, loans guaranteed by the DoE, and loans given by private creditors who have requested assistance from the DoE.

How to Prevent the Tax Refund Offset?

If you know that you cannot pay off your delinquent loans, you should look for options to keep your federal student loans out of default. This can be done in three ways.

Rehabilitate the Loan

In loan rehabilitation, the borrower agrees to pay at least nine monthly payments over a ten-month period. After nine qualified monthly payments, the loan is no longer considered to be in default and the government cannot offset your tax refunds. With loan rehabilitation, the borrower can once again apply for forbearance and deferment.

Consolidate the Loan

If your loans are eligible for consolidation, you may consolidate them into a new loan and choose a repayment plan that is affordable to you. After consolidation, the consolidated loan will be considered as out-of-default. However, the consolidation process usually takes 30 to 90 days; therefore, it is important to start this process early.

Challenge the Offset

If the borrower feels that the offset is unjust, they can request a hearing to appeal the tax refund offset. There are several valid reasons to successfully challenge an offset such as satisfactory repayment arrangements with the borrower, permanent and total disability, false certification discharge, etc. If borrower wins the case, the federal government is obligated to refund the amount that was garnished or seized to the borrower.

How Global Loan Consolidation Can Help You?

Federal student loans are one of the most difficult loans to escape. Most of them are not dischargeable in bankruptcy. Furthermore, the government can employ different methods to collect money from borrowers. Tax Refund Offset is one of the most powerful tools that the government uses to collect outstanding loan debts. However, if the borrower has a good understanding of rules and regulations and settlement options, they can easily get out of this miserable situation without much difficulty.

Global Loan Consolidation is an organization that helps students in exploring loan repayment options. Our experienced and highly trained representatives help you identify the best option according to your preferences and budget. We help our customers through the documentation work to ensure accuracy and avoid any delays or rejections.

If you have received an offset notice or if you want to stop your student loans from getting into default, contact us at (888) 538 2201.