Your Tax Refund Could Be Taken if You’ve Defaulted on Student Loans: What to Know

The Education Department reversed course and announced on Friday that it would delay aggressive efforts to collect what was owed on student loans.

Millions of borrowers who are in default on their student loans got a reprieve on Friday: The government said it would delay aggressive efforts to collect on the debt, including seizing funds from paychecks and income tax refunds.

The announcement from the Education Department did not specify how long the “temporary delay” in forced collections would last, but said the delay would give the department time to overhaul the student loan program and give defaulted borrowers time to evaluate options.

The department did not immediately respond to a request for more details.

The abrupt change, a week and a half before the tax filing season is scheduled to begin on Jan. 26, was announced amid growing concerns about the impact of taking money from borrowers who are already dealing with the high cost of living and an uncertain job market.

Abby Shafroth, managing director of advocacy with the National Consumer Law Center, said in an email on Friday that the delay was “good news for struggling borrowers,” who can use it to take steps to get back into active repayment.

The center and other student borrower advocates had been warning defaulted borrowers to call a special number to see if their tax refund was flagged for seizure.

Federal student loan collections restarted May 5, after a pause that began in March 2020 because of the Covid-19 pandemic. The government had said in December that it would begin notifying affected borrowers of paycheck deductions this month, although it’s unclear if that occurred.

On a visit to Rhode Island this week, Education Secretary Linda McMahon said wage garnishments had been paused. “Well, actually, there is a pause on that at the moment,” she said in response to a reporter’s question about whether seizing wages might make it harder for borrowers to pay back their debt.

What does the delay mean for borrowers in default who expect refunds?

It appears that defaulted borrowers “should be in the clear” for this tax season, Ms. Shafroth said, but it depends on when the government removes the names of defaulted borrowers who may already be on its list of tax filers flagged for refund seizures.

Why does the government take tax refunds for defaulted student loans?

The Education Department can ask the Treasury Department, which oversees the Internal Revenue Service, to intercept, or offset, tax refunds to help repay student loans that are in default. (Federal loans are generally considered in default after nine months of missed payments, although it can take longer for collections to begin.) There is no time limit on the government’s authority to collect defaulted loans.

The government may take all, or just part, of your refund, including any refundable tax credits. It can continue to do so each year until your debt is paid. Among all taxpayers, the average refund is about $3,000.

Because collections resumed late in last year’s income tax filing season, refunds were seized from relatively few student loan borrowers in 2025, said Persis Yu, deputy executive director at Protect Borrowers, an advocacy group. But with almost 10 million borrowers in default, many more had been expected to face seizures this tax season until the Trump administration backed off.

Can the government take money from other payments, like Social Security checks?

Yes. While up to 15 percent of a Social Security benefit check can be taken, the Trump administration has also held off on doing that for defaulted student loans.

Was the government going to notify me if my tax refund was about to be taken?

The Federal Student Aid website says the government sends a notice to your last known address to inform you that a seizure is scheduled to begin in 65 days. You can take action within that period to resume payments and get out of default.

But many borrowers may have been notified years ago, before the Covid relief pause. If you forgot about the notice or misplaced it, you probably wouldn’t have received another one, borrower advocates said. (It’s always a good idea to update your contact information with your loan servicer, said Adam Minsky, a lawyer specializing in student loans.)

How do I find out if I’m on the refund seizure list?

It’s probably unnecessary now to check if you’re on the list for a tax refund seizure, given the delay announced on Friday, Ms Yu said. But if you’re worried, she said, it’s not a bad idea since it takes just a few minutes and “sometimes things go wrong.”

To do so, call the Treasury Offset Program hotline at 800-304-3107. The system will ask you to enter your Social Security number to check if your name is on the list and, if so, what department referred you for collections. If the Education Department referred your debt, you probably have student loans in default, according to the National Consumer Law Center.

Some borrowers who are current on their payments have reported seeing an incorrect “default” notation when they log onto their student loan dashboard. If that happens, contact your loan servicer, said Robyn Smith, a senior attorney with the Legal Aid Foundation in Los Angeles who works with student borrowers.

How do I avoid having my paycheck or tax refund seized in the future?

The most straightforward way is to get your loans out of default and into active repayment status. (You can also repay the loan in full, if you are able, but few people can afford to do that.)

The main options are rehabilitation, which involves making nine on-time monthly payments, or consolidation, in which you take out a new loan to pay off the old debt. Each has pros and cons.

Consolidation is quicker — you can apply online, and it generally takes four to six weeks. But the default remains on your credit report. And if you are working toward loan forgiveness through an income-driven repayment plan, there is a major downside, Ms. Smith said: You’ll probably lose time earned toward cancellation on payments made before consolidating.

Ms. Smith said defaulted loans might need to be manually entered into the consolidation application rather than being included automatically. Double check, she said, to make sure all your loans are included.

“People have barriers even when they want to do the right thing,” she said.

Rehabilitation takes longer, but the default is erased from your credit history (although the record of late payments remains). You usually must call to apply, Ms. Smith said, and borrowers may face lengthy hold times. The contact for defaulted federal loans is usually the Education Department’s Default Resolution Group, operated by Maximus Federal Services (800-621-3115 or visit MyEdDebt.ed.gov).

With either consolidation or rehabilitation, you can apply for an income-driven repayment plan that can make your monthly bill more affordable. There are nuances to each option, and eligibility varies. Try using the government’s online loan simulator to help you choose.

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