Will the IRS take my refund for my student loan in 2024?

Concept of a man in a suit bending under the burden of a student loan
Businessman carrying a large and heavy stone on his back

It’s tax season again, and many ask, “Will the IRS take my refund for my student loan in 2024?”

Tax refunds  can be a source of financial relief for many people. Some use it to pay their bills, settle their debts, or save for emergencies. Getting a smaller refund or none at all could potentially affect budgeting and planning especially if they’re already expecting it. 

Previously, the IRS could garnish tax refunds to collect unpaid student loans in default. This meant that if your loans were delinquent for 270 days or more, the government could seize your refund to pay off the debt. 

However, things are currently different due to some recent policy changes. The government launched a 12-month on-ramp to repayment to provide relief to borrowers after the COVID-19 three-year payment pause for student loans ended. It’s meant to make it easier for borrowers to start paying again. The program runs from October 2023 through September 2024. During this time, borrowers won’t fall into default or get in trouble for missed payments. It also keeps them safe from credit damage.

So, to answer the question ‘’Will the IRS take my refund for my student loan in 2024?’’. No, the government will not take your refund (for now). 

But before you start celebrating, here are five things you need to know about your student loan in 2024. 

  1. Your student loan interest will continue to accrue. 

Although the on-ramp program helps you avoid harsh consequences from not paying your student loan, it doesn’t stop the interest from building up. If you can manage it, we suggest not missing any payments on your student loan. Skipping payments will increase what you owe and make it harder to get back on track with your payments.

  1. Private student loans are not eligible for the 12-month delay program.

The 12-month delay program does not cover private student loans. So, if you miss payments on your loan, your lender can declare your account in default. While they can’t take your tax refund, they have other options. They can take legal action against you and garnish your wages or seize money from your bank account to pay off what you owe.

  1. Missed payments equal missing a month’s credit for loan forgiveness.

If you’re looking forward to getting your loan forgiven through programs like Public Service Loan Forgiveness or income-driven repayment forgiveness, missing payments can cause a problem.

Under these programs, you need to make a certain number of payments to qualify for forgiveness. However, any missed payments do not count towards this required number. This means you’re not getting closer to forgiveness as quickly as you could be.

  1. Missed payments will still need to be paid in October. 

After the on-ramp period ends, missing payments can lead to severe consequences. Even if you’re just one day late, it can make your loan delinquent. If you’re 270 days late, your loan will go into default. This can lead to serious collection actions like withholding your tax refunds and taking money from your wages. This also results in your entire remaining loan balance and unpaid interest being due immediately, causing long-term damage to your credit.

  1. The SAVE plan could save you big. 

Before opting for the on-ramp, consider exploring other options like the Saving on a Valuable Education (SAVE) plan. It might be a better choice and comes with more advantages. You could see $0 monthly bills if you’re earning less than about $32,800 individually or less than $67,500 for a family of four. It also forgives loans faster for people who borrowed $12,000 or less. Plus, if you have unpaid interest, SAVE forgives it too. For more information about the program and how to apply, visit the link: https://studentaid.gov/announcements-events/save-plan

Remember, while the current situation offers temporary relief, it’s important to keep an eye out for any updates and actively manage your student loans. Addressing any potential defaults before September 2024 can ensure you receive your full tax refund and avoid future complications.

If you need help with resolving your tax problems, call

Tax Samaritan for a free 15-minute, no-obligation consultation at 775-305-1040.

All About Randall Brody
Randall is the Founder of Tax Samaritan, a boutique firm specializing in the preparation of taxes and the resolution of tax problems for Americans living abroad, as well as the other unique tax issues that apply to taxpayers. Here, they help taxpayers save money on their tax returns.

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