Student Loan Tax Offset Hardship Refund: A hardship saviour

Understand the details of Student loan tax offset and student loan tax offset hardship refund. Know how to get qualified for student loan tax offset hardship refund through proper requests. Know what to do if your request is denied and how to avoid student loan tax offset.

Updated by Kanishkar P on 4th February 2020

Student loans help you to achieve your goals by helping you through financial assistance. But you should not forget that you are supposed to repay them at any cost. If the Federal Student loans are left unpaid for a certain period then this may lead to serious consequences. It may take you to tax offsets. There are ways to tackle this situation too. This article takes you along the ways to deal with these issues and clears your doubts about the relevant cases. 

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Student Loan tax offset

Federal Student loans are usually the best among all the available student loan options. But they are also loans that you must repay. One of the government’s powerful tools is to collect the repayment of federal student loans, one way or the other. If you have defaulted on your federal student loans then the government can use your tax refund to repay the student loan. 

There are even a number of states that have laws used to authorize state guaranty agencies to collect the state income tax refunds given the individual has defaulted. Computer records of the borrowers who have defaulted are sent to the IRS. A borrower who is in default can expect all or a portion of their tax refund taken and used in the repayment of their student loans.

The federal government does not require anyone’s permission to garnish a borrower’s wages if he/she has defaulted on their student loans. A request will be sent to the Treasury from the Department of Education to seize your tax refunds. If the debt is paid off and there is a balance left from the amount seized it will be returned back to the borrower.

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Notification on student loan tax offset

Before 65 days for the start of your tax offset, the government will notify you. The notice will be sent to your known address only once. It may contain your Student loan details and how much you owe and also the rights that you hold.

Once the notice has been sent, the government can start collecting your tax refunds from the specified date until your debt is paid. 

Student loan tax offset hardship refund

Collecting your student loan amount from your tax may cause another financial hardship for you and your family. In such cases, you can request for Student loan tax offset hardship refund. The Student loan tax offset hardship refund helps you in your financial hardships, but you must be eligible to qualify for it. Financial hardship may not be the only reason that fetches qualifies you for the Student loan tax offset hardship refund, any reason that justifies your hardship and is accepted by the government can qualify you for the refund.

Qualifications for tax offset hardship refund

Financial hardship is more than not affording your student loan payments. It must be a serious financial situation. The following have been approved as grounds for financial hardship, according to Educational Credit Management Corporation(ECMC):

  • Exhausted unemployment benefits

  • Eviction or foreclosure

  • Utility disconnection or shutoff

  • Homelessness

Temporary suspension from your job due to unforeseen circumstances may also be a reason for your hardship, that may draw you into tax offsets. But you must know how to prove an undue hardship on your student loan to get a chance to qualify for the student loan tax offset hardship refund. 

You must submit the required documentation for each of these. If you’re eligible, take the proper steps to apply for student loan tax offset refund based on hardship.

Requesting tax offset hardship refund

If you feel that you are any of the above-mentioned situations and facing financial hardship, then you can request for the Student Loan Tax offset refund. 

  • Your refunds are most likely to be offset by an agency or the U.S. Department of Education. You can find out for sure by logging into the National Student Loan Data System or contacting the Treasury Offset Program.

  • Once you know who to contact, find the proper form to submit to get a tax offset refund.

  • You’ll need to provide proof of your financial hardship. This will vary depending on your hardship. The required documents should be listed on the form.

  • Submit your form and required documents. Be sure to include only copies, not original documents, as you most likely won’t be getting them back.

Keep regular track of the request until it is approved. You must note that even if you qualify on the request for a student loan tax offset refund, you should resume to make payments on the student loan as soon as possible.

What if the request is denied?

There are chances of denial of your student loan tax offset hardship refund due to various reasons. Sometimes you may not qualify for the tax offset hardship refund. So you must be careful while repaying your loan. Make sure that you don’t get into such issues in the future. There are not many solutions if your request on tax offset refund being denied. 

How to avoid Student loan tax offset?

If you are currently approaching default or already in default on your federal student loans then you should take the best possible action to try and get your loans out of default before tax season. Going ahead with default rehabilitation, consolidation or entering into a repayment plan where the payments to be made are decided based on a borrower’s income and family size. 

If you are not quite sure how to go about getting out of default then it is recommended to seek financial help or see the best companies to refinance your student loans with. It is important to be well aware of all the options available to you and go for the option that best suits your financial condition.

Understand the student loan repayment terms and regulations laid on it, so that you can find some ways to get out of these issues. 

Concluding Thoughts

You can avoid a tax offset by keeping your student loans out of default. The effects of defaulting your student loans are severe. So you need to be careful in meeting the deadlines on paying your loans, or else you may end up into student loan tax offset. Have a clear knowledge of the Student loan tax offsets refund and the terms and regulations pertaining to it. You have options to manage your student loan debt. Avoid a tax offset entirely by getting your loans under control. Unfortunately, if you got into it due to some financial hardships and valid reasons, you always have a choice to get your taxes refunded. Just make sure that you reach out to the appropriate authority at the right time with all the correct records of your student loan.