Student Loan Treasury Tax Offset

Federal Student Aid (FSA) can request that the Treasury Department arrange to collect money from the income tax return of someone who has defaulted on their student loan.

If the FSA proposes student loan tax offset – Treasury offset they must give the person prior notice that their tax refund may be reduced so they can have a chance to demonstrate that the student loan is not in default.

Also, if possibly, this law is not enforceable in their particular case. They can avoid tax offset by making other arrangements to repay the loan.

After the notice has been sent to the address in the income tax return the person who has defaulted has the opportunity to explain the situation and state objections. The procedure is clearly given in the information letter. However, the student loan tax offset – Treasury offset will not be delayed while these objections are waiting for resolution.

If the objections are successful, the amount deducted will be refunded. If an amount has been deducted from a joint income tax filing, the amount taken from the non-debtor spouse can be recovered by filing an injured spouse claim with the Internal Revenue Service (IRS).

There are other places where student loan tax offset – Treasury offset can be taken besides income tax refunds including Social Security benefits.

Guaranty agencies that gave student loans that have been defaulted can also take advantage of the Treasury Offset Program and take funds from tax refunds and other government payments. Once the student loan dept has been certified for the Treasury Offset Program it will stay that way until the loan has been repaid in full.

The student loan tax offset – Treasury offset can take money from your tax refund, economic stimulus payments, 15% of any Social Security payments and 100% of the wages of a Federal contractor.

To stop certification of a student loan for tax offset there needs to be an acceptable repayment agreement and the first payment made. There are websites that can help with different options if a loan has been certified.

It is possible to find out if a debt has been sent for certification by calling the agency which holds the loan. The Financial Management Service (FMS) of the Department of Treasury can give the contact numbers for any agency that has made student loans. After deducting an amount for repayment of the loan from the income tax refund the balance of the refund remaining will be sent to the debtor.