It’s tax season, the one time the government gives back what they owe to the American people. The average working American can expect anywhere from $300 to up to $8,000 back from the Internal Revenue Service.
But for some people there is a catch to this possible windfall of money. If you’re a Federal Student Loan Borrower, and you haven’t been making your payments, the government could garnish your tax return or take it away all together.
If you’re not making payments because you have a deferment or forbearance, do yourself a favor and double check the status of that. One of the collection tools available for defaulted federal student loans is called a Federal Income Tax Return Intercept.
Deferments and forbearances come in 6 and 12-month time spans. If you don’t know when it ends, make a call to your student loan servicer and verify your account is still active. If it is then you have nothing to worry about in terms of filing your taxes.
However, if the deferment or forbearance has ended, you may be in trouble depending on how long ago your plan ended. If you have missed a few payments, even as many as 6, you should have time to save your loan from going into default. Call your servicer immediately and ask what can be done to get your loan back on track. If you’ve missed 9 or more payments, your loan is likely in default.
If your loan is in default, you may not get your tax refund due to a Federal Income Tax Return Intercept.
How does the Federal Income Tax Intercept Work
The U.S. Department of Education sends a note to the Treasury letting them know that you have not made payments on your federal loan. Upon the Treasury being told by the IRS to issue a refund check, your funds are instead forwarded to the U.S. Department of Education to be applied towards your defaulted federal student loan balance.
Getting Income Tax Refunds Back After Intercept
If you file a joint tax return with your spouse and part of the money is owed to the non-borrowing spouse, he or she can file an IRS form to get their share of the refund back.
You, the borrower, will not get back any refund money taken to pay your defaulted federal student loan. You can avoid future intercepts by rehabilitating your federal student loan and remaining current on payments.
ALWAYS CHECK THE STATUS OF YOUR LOAN
If you’re in default, take action. Don’t let the fear of not wanting to know push you further into debt. Get your loan out of default, get a payment plan with the help of Degrees of Success and then you can file your tax return with no fear. Can you fix your default before the April 15th deadline? It is possible, but you may find it less stressful to file an extension until October to research and act on the best method to fix your default.
For more information about getting your loan out of default please contact the Degrees of Success team today.