Now you’ve just made it to the Treasury Offset section of the Quick Start A-Z Guide. Did you just receive a letter stating for you to set up a payment arrangement by a certain date to avoid getting your tax refunds seized? Did you receive a letter stating that you have been certified for Treasury Offsets? Or did you just file your taxes and didn’t receive your refund yet? Whatever the case may be, you’ve come to the right place. The Treasury Offset Program was first implemented to help borrowers in default reduce the balance on their student loan(s). However over the years the Treasury Offset has evolved more into a consequence for non-payment and has hurt borrowers more than it helps. The payments seized from the U.S. Treasury are only applied towards your interest charges first before it even touches your principle. There a 3 certification stages for Treasury Offsets which include:
- Not yet certified for Treasury offsets
- Pre-certified for Treasury offsets
- Certified for Treasury offsets
I haven’t been certified for Treasury offsets yet. If you haven’t yet been certified for the Treasury Offset Program and you don’t want to have your entire tax returns or a portion of your social security income taken. You’ll need to seek repayment immediately (section 2 of Quick Start A-Z Guide). Figure out your best options to either pay off, or get your defaulted federal student loan(s) out of default status. Once you’re student loans are paid off or out of default, you’ll no longer be eligible for the Treasury Offset Program to take place against you.
I have been pre-certified for the Treasury Offset Program. If you’ve been pre-certified for Treasury Offset it means that the Department of Education has already selected your social security number to be included on the Treasury offset list. However this does not mean they’ll start taking your taxes the next time you file. The pre-certification process begins with a letter sent to you roughly around the month August of every year. (A sample of this letter can be found in our document archive) Pre-certification for Treasury offsets only takes place once and the Department of Education will only give you 65 days from the date the letter was sent to
set up a voluntary arrangement in order to avoid being certified for Treasury offsets, and having your social security number placed on the Treasury offset list. You’ll need to seek repayment immediately (section 2 of Quick Start A-Z Guide). Figure out your best options to either pay off, or get your defaulted federal student loan(s) out of default status. Once you’re student loans are paid off or out of default, you’ll no longer be eligible for the Treasury Offset Program to take place against you. However if your 65 days expires, your social security number will be placed on the Treasury offset list, and you will be permanently certified for Treasury offsets as long as your account is in a defaulted status.
I have already been certified for Treasury offsets, and the Department of Education is about to or has been actively seizing my entire Tax Return or a portion of my social security income. If you have just been certified for the Treasury Offset Program meaning your 65day notice mentioned in the section above has already expired. Once you’ve been certified for Treasury offsets, you social security number was placed on the Treasury offset list and typically there is no stopping the Department of Education from seizing your entire tax return or a portion of your social security income. We’ll have a separate section for social security student loan borrowers below.
So what can you do in this situation? Your best bet will be to seek repayment immediately (section 2 of Quick Start A-Z Guide). What the collection agencies won’t tell you is that the amount being seized from your tax returns can actually be counted towards a settlement compromise! So if the balance on your student loan is near or just higher than the amount being taken from your taxes, you can potentially have your student loan PAID OFF and actually save money while you’re at it! I would say 90% of student loan borrowers out there are unaware of this option and has allowed the U.S. Department of Education to take their taxes year after year but because the offset payments are only applied towards interest charges first, most student loan borrowers find out that their balance has barely budged even after thousands of dollars have been taken. This is because interest continues to accumulate on a daily basis. Seek repayment immediately (section 2 of Quick Start A-Z Guide). Figure out your best options to either pay off, or get your defaulted federal student loan(s) out of default status. Once you’re student loans are paid off or out of default, you’ll no longer be eligible for the Treasury Offset Program to take place against you. To learn more about the Treasury offset certification process please turn to page 33 on the Student Loan Blue Print. Make sure you read the Treasury offset section in the Student Loan Blue Print to find more options like Injured Spouse Claims and filing extensions for your taxes!
I’m currently a defaulted federal student loan borrower receiving social security income. If this is the case you risk the Department of Education seizing a portion of social security income due to that fact that social security is federal funds, and social security checks are cut by the U.S. Treasury. If a portion of your social security income has not yet been deducted by the U.S. Department of Education refer to the Treasury Offset Section above to find out what your current certification status is. If a portion of your social security income is being actively seized by the U.S. Department of Education then you’ve made it to the right section. What are the options available to you? You’re already on a limited fixed income! First things first! Make sure you check to see if you’re able to make any of the repayment options (section 2 of Quick Start A-Z Guide) on TOP of whatever amount they’re taking out of your social security income. Calculate the minimum payments with our settlement and repayment calculator, and if you’re able to squeeze any the minimum payments in your current budget it is highly advised that you do so. Remember the social security deductions will continue to take place even if you’re making voluntary payments, but once you’ve met the terms and requirements of a repayment option then your social security offset will finally come to an end.
I want to make payments to get my loans out of default, but there’s no way I can fit a minimum payment with my fixed income especially because the U.S. Department is already taking a portion of my social security income. If you find yourself in this situation you still have hope! You’ll need to file a hardship claim. The U.S. Department of Education is a lot more lenient with reducing the amount of regular monthly social security offsets compared to reducing payment amounts in wage garnishment. If you’re currently in an extreme hardship situation, the U.S Department of Education can even declare a Full Hardship and temporarily suspend the offset. They may also temporarily suspend your offset while you pursue a disability or other discharge. (A copy of this application can be found in our Document Archive [module 4]) Once you’ve been approved for either Full or Partial Hardship, it is highly recommended that you don’t waste any time and begin repayment immediately (section 2 of Quick Start A-Z Guide). Make sure you review the Treasury Offset section on page 33 of the Student Loan Blue Print for more options!
