Will Student Loans Take My 2020 Tax Refund?

Collection activities are paused for most federal student loans until Sept. 30, 2021.
Ryan LaneApr 9, 2021
GettyImages-940519356

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

If you default on a federal student loan, your tax refunds can be taken to help cover what you owe. However, the government has paused this program and other collection activities through Sept. 30, 2021, due to the pandemic.

After that relief ends, the best way to stop student loans from taking your refund is to address the default before filing your tax return. Once your money is gone, it's much harder to get it back.

The original coronavirus relief bill stopped tax refunds from being taken for defaulted student loans if you filed your return after March 13, 2020. Refunds being processed as of that date were also protected.

If you filed your 2019 taxes before March 13, 2020, contact your loan holder to see if it will return some or all of the money to you. Loan holders have different standards for reversing garnishment, but you’ll likely have to start making payments again to get them to act.

Collection activities are currently paused through Sept. 30, 2021 for all federal student loans and commercially held FFEL debt, which could protect your 2020 refunds as well. The Department of Education has said that borrowers with loans in default will be given the opportunity to enter a payment plan — which would prevent tax refund garnishment — before collection activities restart.

» MORE:

Relief checks issued due to the coronavirus pandemic also aren't being taken for defaulted federal loans. But your check could be at risk if a judge has allowed a lender to garnish your bank account due to a defaulted private student loan.

» MORE:

You must have federal to have your tax refund garnished. Federal student loans enter default after 270 days of past-due payments. Private student loans in default aren't eligible for tax refund garnishment.

If your tax refund is subject to garnishment, you’ll receive a letter from your loan holder saying it has referred your account to the Treasury Offset Program, or TOP. This is the part of the U.S. Department of the Treasury tasked with taking federal payments to cover delinquent debts owed to government agencies, such as past-due child support and defaulted student loans.

Your loan holder will send you a tax offset notice before your refunds are seized. This typically happens months before you file your return, so you have time to take action. But you might receive that notice only once.

For example, say you had a loan default in January 2019. By November, you likely would have heard that your 2019 refunds would be offset. That might not have happened because of coronavirus relief measures. The same thing could happen in 2020. Still, if you don't address the defaulted loan, your 2021 refunds could be seized without additional notice.

You can't dispute tax garnishment on the grounds of not receiving the offset notice. Check that your loan holder has up-to-date contact information for you. If you're not sure who holds your loans, log in to your account at . The Treasury Department will contact you after the offset.

» MORE:

Here are the best ways to stop student loan tax garnishment, as well as the records you’ll need to support each:

Once an offset notice is sent, you have 65 days to contest it. If you think the garnishment is based on inaccurate information, you have a 20-day window to ask for your records. Once your loan holder sends your records, you have 15 additional days to request a formal review.

Your offset notice will list instructions for setting up a review. If you have questions about this process, you can also contact TOP directly at 800-304-3107.

» MORE:

Your student loan holder will be able to seize your refund — and your future refunds — until the tax offset stops.

You can get federal student loans back in good standing through  and consolidation, which will also stop other consequences of default like . Rehabilitation takes longer to complete, but you don’t have to finish the process to prevent future garnishment. You just have to make payments in line with your agreement.

» MORE: 

If you missed your review window or already had your refund seized, you should still contact your loan holder to see under what circumstances you can receive some or all of your money back. Loan holders have their own policies for these situations.

If you’re married and file taxes jointly, you may be able to protect your spouse’s part of the federal tax refund by submitting an injured spouse allocation form (IRS Form 8379).

You can provide this form when you file your taxes or afterward if you weren’t aware of the offset at the time. You may have as long as three years from the due date of your original return to submit this paperwork.

You may also be able to prevent student loan tax garnishment for your joint state return. Those rules depend on where you live. Check with your state’s department of taxation to learn more.

» MORE: 

On a similar note...
Dive even deeper in Student Loans