Stopping a Tax Refund Offset:
A Federal student loan in default will negatively affect a person’s credit report ranking more than any other credit card or loan activity. In addition, student loans can rarely be dismissed by filing bankruptcy. Due to the Treasury Offset Program (TOP), no court order is required to begin wage or tax garnishments with defaulted student loans after 270 days of non-payment. The U.S. Department of Treasury has more power to seize property and garnish tax refunds and/or wages than other financial institution.
Garnishments for student loan defaults are not limited to just wages and federal tax refunds. Other forms of government funds may also be garnished, such as social security benefits, disability benefits, federal or state tax refunds, etc. A defaulted borrower is only entitled to a letter notifying him or her of the garnishment amount and the date the initial seizure or garnishment will occur. The notice should also include the borrower’s rights; and information on how to avoid tax offset garnishments.
As much as 100% of a borrower’s state and federal tax refund may be garnished as a result of a default on a loan. If you have already had your wages or tax refund(s) garnished or have been notified of a potential garnishment, by refinancing the loan or enrolling in a loan rehabilitation program, you can stop a garnishment.
When student loan payments are up-to-date and in good standing, there are tax deductions borrowers can take advantage of and are available for students currently enrolled in school, as well as borrowers who have already graduated and are making regular on-time payments.
A borrower is eligible for tax deductions as a current student or a graduate under the following circumstances:
- No one else is claiming borrower as a dependent on their yearly tax returns;
- Borrower’s income is less than $60,000 (or $120,000 when married and filing jointly);
- Borrower’s income is more than $60,000 per year, but less than $75,000 ($150,000 when married and filing jointly);
- Borrower is receiving Employer Education Assistance for undergraduate or graduate course work tuition reimbursement (benefits up to $5,250 and in some cases over $5250 if educational studies are considered a company benefit);
- Borrower is self employed and writing the deduction as a company expense.
Canty & Associates has the experience to refinance student loan debt to avoid or stop tax refund garnishments with little or no hassle on your part. Contact us by phone 855-347-3001 or submit your request or questions online. We provide FREE consultations to remove garnishments on tax refunds or wages.