Student loan borrowers in default face tax refund garnishments, known as offsets. Here's what you should know:
who are severely delinquent on their student loans. This is the result of the Treasury Offset Program, which was created in 1986 and is overseen by the Bureau of Fiscal Service. This program allows departments of the federal government to ask the Internal Revenue Service to seize tax refunds for the purpose of debt repayment toward state or federal governments. have to grant the government permission to withhold your tax refund and use it toward your student loan debt.
You’re considered in default on your student loans once you don’t make your scheduled student loan payments for at least 270 days on loans made through the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan Program. For loans made within the Federal Perkins Loan Program, you could be considered in default on the first day your payment is late.
This also means that, to protect yourself from tax offsets, you have to avoid default or get your student loans out of default. According to financial attorney Leslie Tayne ofRepayment in Full However, you may have a loved one who is willing to lend you the money to pay the loan off in full, so you can get out of default and preserve your financial future. Of course, you would need to pay your loved one back, which creates another set of problems, says Tayne.Tayne says that, in loan rehabilitation, you will sign an agreement with your loan holder stating that you agree to make nine consecutive on-time payments.
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