Student Loan Taken From Tax Return
If you are in default on a federal student loan, it is possible that the IRS will reduce your tax refund to pay off your defaulted loan. If this happens, you may be able to get your money back from the IRS. The decision to refinance is up to you.
Your tax refund may be lower than you had anticipated.
So, you might be wondering what the relationship is between your student loans and your tax refund. If you have federal student loans, they can be taken from your tax return. This means that if you owe on those loans, there’s a chance that your refund will be smaller than anticipated.
If you have made payments throughout the year and haven’t missed any payments so far this year, then there’s no problem—you should get back the full amount of your original loan principal and interest with no penalties or fees added onto it. However, if there are still some outstanding balances due from previous years’ taxes or other outstanding balances left over from other types of debt (like credit card debt), then those could get subtracted from this year’s return as well—which means less money for new clothes and gadgets!
Luckily though: even though we just lost some money because of our last two years’ worth of student loan debt payment plans combined with all our other debts such as credit cards etc., we now have more flexibility when it comes time again next year around April 2020 when everything needs paying off again.”
If you have a federal student loan through Sallie Mae, and are in default, the IRS will reduce your tax refunds to pay off your defaulted loans.
If you have a federal student loan through Sallie Mae and are in default, the IRS will reduce your tax refunds to pay off your defaulted loans.
The maximum amount the IRS can withhold from your tax refund is 15% of it. The amount taken depends on how much money you owe and other factors such as if any part of your loan has already been paid off or if you’ve already made payments towards it.
If you have any questions about this process, contact the IRS.
By law, the IRS cannot seize any more than 15 percent of your refund to pay for your defaulted student loan.
You may be wondering how this 15 percent is calculated. In order to calculate the amount of your refund that will be withheld, they take all of your income tax withholding and other documents.
In some cases, if you are unable to pay off your student loans because of an unforeseen event like a layoff or illness, you can apply for a deferment or forbearance. These options allow you to temporarily stop making payments on a portion or all of your loan(s). The interest continues to accrue during this period but at a reduced rate.
When applying for deferment or forbearance on federal student loans, it’s important that applicants have their documentation ready and complete their application online before submitting it through their servicer (the company responsible for collecting payments from borrowers). If approved for either type of assistance by their servicer—which uses its discretion when considering each case individually—you will still receive monthly bills from them throughout the duration of either option (they won’t be sent directly from Navient).
It is possible to get your tax refund back from the IRS if it was wrongfully seized to pay for a defaulted student loan.
If you discovered that your tax refund was seized to pay for a defaulted student loan, it is possible to get your tax refund back from the IRS. However, you must proceed with caution when doing so. First of all, make sure that your name is actually listed on the account in question. If it isn’t and someone else’s name appears instead, contact them immediately and ask them to remove their name from the account since it could result in both of you being held liable for any unpaid debts.
Once this has been verified by both parties involved, you should then contact the IRS at 1-800-829-1040 or online at www.irs.gov/Individuals/Contact-My-Local-Office?src=irn&sid=IRS_TaxHelp_Link_3&keywordtype=narrow|welcome&sid=IRS_TaxHelp_Link_3&keywordtype=narrow|welcome|formid=1040;rpnnbr=[yourSocialSecurityNumber];rptid=[theEINfromtheIRSTaxReturn]#formid#rptid[IRS Tax Help Link 3]#rsfnbr[W8235 A01A]
Paying down a portion of your student loans may help you get your tax refund from the IRS sooner.
If you’re eligible for the student loan interest deduction and have federal student loans, consider paying off a portion of your loan(s). You can do this by making a one-time payment or setting up an automatic payment plan with your loan servicer. This can help you get your tax refund from the IRS sooner.
If you’re not sure how much to pay toward your student loans, speak with a tax professional about calculating how much money will be deducted from your refund. If you want to make sure that the maximum amount possible is taken out of each paycheck for paying down debts such as credit card debt or mortgages even though it may affect other financial priorities like saving for retirement or buying a home, we recommend using our free budget calculator tool here at GoodFinancialCents.
The decision to refinance is up to you.
A final note about refinancing: if you have a high interest rate, it may make sense to refinance. Otherwise, even with the money you’ll save on fees and penalties, you might end up paying more over time than you would if you just paid off your loan in full.
If this sounds like something that might be right for your situation and goals, consider speaking with an expert at one of our partner institutions.
Federal student loans can be taken from your tax return, but there are ways to get that money back.
There are a few ways you can get your tax refund back if it was wrongfully seized to pay for a defaulted student loan. First, you may be able to challenge the seizure and have the money refunded to you. This can happen if the court ruled that the state department of revenue did not follow proper procedures when seizing your tax refund, or if they missed some important deadlines in their process.
Second, if you were forced to pay down any portion of your student loans as part of a repayment plan with a collection agency or debt collector and then later on filed for bankruptcy protection (and had all other debts except for federal education loans discharged), then any money taken from your federal education loan refunds would also be discharged in bankruptcy proceedings and should be returned to you (though this situation is unlikely).
If you feel that your tax refund was taken from the IRS in error, you are within your rights to dispute it. You can also refinance some or all of your student loans to lower your monthly payment and get more money back each month. There are pros and cons to both options so make sure you do some research before deciding on one over another.