In a major blow to millions of debtors, the U.S. Department of Education has started collecting tax refunds for the borrowers in arrears again. This action is executed after a few years of a break and it signifies the beginning of a broader debt collecting effort from non-payers or late-payers.
Important Things That Borrowers Need to Know About the Garnishment Process
After a long period of waiving their loans, the federal government has now restarted the recovery of debts from defaulters. As part of the tax refund garnishment, the Treasury Department is using the power of the Federal Tax Refund Offset Program to retain 100% of federal tax refunds from students who defaulted on repayment. This collection also includes the seizure of other federal payments, among which are Social Security and federal retirement benefits.
Up to 15% of the wages of borrowers who failed to pay their loans might be garnished at a later date if they do not rectify the situation with their student loans. This move, which the Department of Education is practicing, aims to bring the loan back into the good standing as well.
Borrowers Can Take Steps to Be Safe from Wage Garnishment
It is quite likely that for quite many borrowers wage garnishment will be the first step in breaking through their tax returns. Nonetheless, later the Department of Education will provide the defaulter with an option that can bring him out of the net of further recovery actions. When in default, they will first get the notification letter from the Treasury which will at least 30 days to initially challenge the garnishment and also make the payment or set an installment agreement.
If the borrowers fail to be proactive on time, it could lead to the deduction of 15% of their income starting from this summer. It is suggested that borrowers keep their addresses up to date with the Department of Education so that they don’t miss these very important notices.
What’s Next for Borrowers in Default?
Having seized the tax refunds, the US government with a shift in its priorities has now turned its attention to wage garnishment in cases of state university borrowers in default. The move is expected to have grave implications for the remaining people who have not yet arranged with the government on how to repay their loans. The Department of Education has unequivocally stated that it will pursue the borrowers who are still delinquent, a position that has given rise to speculations that the government may go as far as collecting their taxes should they fail to take action to sort out their loan cases.
Taking money back by the tax return gain is a simple example of the start of the process, further reaching the state of ‘summer’ which will prohibit many borrowers from tax refund garnishment. The borrowers who are facing the issue of loan default are advised to contact the Department of Education as soon as possible, so that they can get the potential options before the garnishment period becomes a reality.
