Several lawmakers from across the country recently released a letter claiming that President Donald Trump and his administration are “improperly” taking away Americans’ tax refunds and putting it toward their student loan debt without giving them the required 60-day notice. According to the letter, this has led to financial problems, including “evictions and utility shutoffs that are harming American families.” Below, we share exactly what you need to know about these claims, including how to tell if this news is going to impact you.
What to know about the student loan refund issue
On Thursday, September 25, over a dozen members of congress sent a letter to Linda McMahon, the Secretary of Education, saying they believe the Trump administration had been taking away Americans’ tax refunds and using the money to pay off these citizens’ student loan debt. By doing so, the lawmakers claim the administration violated the 60-day notice period, making it harder for borrowers to plan for this switchup.
“The purpose of that 60-day notice is to equip the student borrower with the necessary information to prevent the seizure of their tax refund or Social Security benefits,” the letter reads, per CNBC. “Many borrowers have likely gotten married; moved across state lines; become parents of dependent children; or have suffered drastic misfortunes that aren’t reflected in their individual profiles with the now-gutted FSA [Federal Student Aid].”
“The Department [of Education] should consider borrowers’ potential life changes as an additional responsibility for issuing a renewed notice before collecting on a defaulted student loan.”
As of publication, the Trump administration, McMahon and the Department of Education have not responded to these claims. However, back in July when the One Big Beautiful Bill Act (OBBBA) was passed, the administration did make several changes to student loans, including eliminating the SAVE (Saving on a Valuable Education) plan and creating an income driven repayment plan, also known as the RAP plan—both of which make it harder for borrowers to pay off their loans, according to lawmakers and financial experts.
How does having your tax refund go toward your student loan payments work?
If you’re one of the Americans whose tax refunds are going to be seized for student loan payments, here’s what you need to know: According to the Student Aid website, you’re supposed to receive a notice 65 days in advance informing you that your tax refund will be seized to pay your student loan debt—but Congress members claim this is no longer happening.
“Federal law related to the collection of debts owed to the government requires ED [Department of Education] to request that the U.S. Department of the Treasury withhold money from your federal or state income tax refunds, Social Security payments (including Social Security disability benefits) and other federal payments to be applied toward repayment of your defaulted federal student loan,” reads the website. “This withholding is called Treasury offset.”
This form of repayment is different from some of the other involuntary payment plans such as wage garnishment, which takes money out of your paycheck as opposed to your tax refund or social security payments.
Can you avoid having your tax refund go toward your student loans?
Once you receive the notice that your tax refund is going to go toward your student loan payments, there are a few steps you can take during that 65-day period to keep that from happening. These include establishing an approved repayment agreement, paying off the debt in full or making a valid objection as to why you shouldn’t have to pay it.
According to the Department of Education, valid objections include if you aren’t actually behind on payments, if you’re bankrupt, if you’re disabled or if you believe you actually don’t owe them any money.
If you have any questions about these these objections, the department recommends sending a letter to the following address: U.S. Department of Education, Default Resolution Group P.O. Box 5227 Greenville, Texas 75403-5227. In the letter you should include your Social Security number or account number, the debts you have questions on and what documents you are hoping to receive.
If you submit the forms “within 20 days of the date listed on the notice of intent to offset, you will have 15 days after the date the documents are mailed to request a review, even if that would take your request beyond the date printed on the notice,” according to the Student Aid website.
