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etheralartist
New Member

Last year my return was taken by federal student loans. I had no warning and lost money that I needed for my family. How can I make sure it doesn't happen the same again?

I heard there was a way to protect the portion meant for your child. Is this true? I can not suffer another tax return loss.
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HelenaC
New Member

Last year my return was taken by federal student loans. I had no warning and lost money that I needed for my family. How can I make sure it doesn't happen the same again?

No, I have not heard of that.

If you are the spouse of a person whose tax return is taken for student loan debt, you might be able to get a portion of your refund by filing Form 8379. See How do I file Form 8379, Injured Spouse Allocation?

If these are your student loans, your best option is to get your student loans out of default.  To do that, you have a few options

  • Consolidate your loans into the Direct Loan program.  If you are eligible for this consolidation, all your loans would be bundled up into one new loan, likely with a new federal lender.  When your loan consolidation is complete, your new loan will be out of default and in good standing.  During this consolidation, you are also able to choose a payment plan that is affordable for you.  The Pay As You Earn(PAYE) and Income-Based Repayment Plan(IBR) both can offer payments as low as $0.00 per month depending on your income and family size. The consolidation process can take up to 30-90 days from when first filed, so it’s important to start this process as soon as you can.
  • Rehabilitate your loans with your current lender. If you and your lender can agree on a reasonable and affordable payment plan, you can start to make payments under this rehabilitation to get your loans back into good standing.  Typically a rehab will take nine months, and any late payments will restart your recovery period. After the rehabilitation is completed, you will likely be back to having to make larger payments on your student loans, but you will no longer be in default or be under threat of a tax offset or wage garnishment.
  •  Repay your defaulted student loans in full.  If your loan balance is an amount that you can pay off in full, this is an option as well.  Unfortunately, this is rare, and most borrowers must select to consolidate their loans, or enter a rehabilitation on their loans.

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2 Replies
HelenaC
New Member

Last year my return was taken by federal student loans. I had no warning and lost money that I needed for my family. How can I make sure it doesn't happen the same again?

No, I have not heard of that.

If you are the spouse of a person whose tax return is taken for student loan debt, you might be able to get a portion of your refund by filing Form 8379. See How do I file Form 8379, Injured Spouse Allocation?

If these are your student loans, your best option is to get your student loans out of default.  To do that, you have a few options

  • Consolidate your loans into the Direct Loan program.  If you are eligible for this consolidation, all your loans would be bundled up into one new loan, likely with a new federal lender.  When your loan consolidation is complete, your new loan will be out of default and in good standing.  During this consolidation, you are also able to choose a payment plan that is affordable for you.  The Pay As You Earn(PAYE) and Income-Based Repayment Plan(IBR) both can offer payments as low as $0.00 per month depending on your income and family size. The consolidation process can take up to 30-90 days from when first filed, so it’s important to start this process as soon as you can.
  • Rehabilitate your loans with your current lender. If you and your lender can agree on a reasonable and affordable payment plan, you can start to make payments under this rehabilitation to get your loans back into good standing.  Typically a rehab will take nine months, and any late payments will restart your recovery period. After the rehabilitation is completed, you will likely be back to having to make larger payments on your student loans, but you will no longer be in default or be under threat of a tax offset or wage garnishment.
  •  Repay your defaulted student loans in full.  If your loan balance is an amount that you can pay off in full, this is an option as well.  Unfortunately, this is rare, and most borrowers must select to consolidate their loans, or enter a rehabilitation on their loans.
rseago0806
Level 3

Last year my return was taken by federal student loans. I had no warning and lost money that I needed for my family. How can I make sure it doesn't happen the same again?

I assume that this is the first and only consequence of ignoring your student loans. Consider yourself lucky.   If you own a house, they'll take that too before you can sell it.   Here's most likely your fix:  What you want to do is lessen the amount of taxes taken out of your paycheck .      You can fill out another W-4 which tells your employer how much you want taken for taxes instead of the usual claim.   There is a box on the form for you to write in the number.     You can figure out that number by looking at prior returns and come up with a best guess.   Just know that if you are short, you will owe and whatever you are over they will take.   You're goal is to zero out or at least  make it so what the federal government does take is minimal.  Remember we are under a "pay as you go" tax system.  But how much we ACTUALLY owe isn't computed until the END of the tax year, so we "pay an overestimated amount as we go" through our paychecks so that the federal government is sure to get their take and any amount overpaid, is what a "tax refund" is.   It is NOT a gift or a break it is simply as a result of the government taking more than their fair share of our hard earned money FIRST before it ever gets in our hands.     Self-employed folks are expected to pay "estimated taxes" 4 times a year with a penalty applied at the end of the year for not doing so - basically a penalty for not "paying as you go."   The government doesn't trust us to pay them at the end of the year, they want to be paid as we make it.     Nice how this works, huh?   The American people are extremely ignorant as to how the government takes advantage of them and since we are not taught about taxes or the stock market or about investments in school, it is very very easy to keep on doing this charade.   Still just be glad we don't live in a country where they can put you in jail for not paying a student loan.   

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