Student Loan Collections Are Back: What It Means for Your Tax Refund in 2025
Starting May 2025, the U.S. Department of Education has resumed collecting on defaulted federal student loans. While the Treasury Offset Program (TOP) has remained active for things like unpaid child support or back taxes, it will now once again be used to collect unpaid federal student loan debt. If you're behind on your student loans, your tax refund, wages, or even Social Security benefits could be affected.
Here’s what you need to know and how to protect your finances.
What Is the Treasury Offset Program (TOP)? TOP is a federal debt collection tool that allows the U.S. Treasury to withhold money from certain federal payments — like tax refunds, Social Security, or federal paychecks — if someone owes specific types of debt to the government.
While it's always been in place for other debts, student loan collections through TOP were paused during the federal loan forbearance. That pause is now over.
How Your Tax Refund Could Be Taken If you're in default on your federal student loans, your tax refund could be partially or fully withheld and applied to your loan balance.
Even if you filed jointly with a spouse, your refund can be garnished. However, in certain cases, the Injured Spouse Allocation form (Form 8379) may help your spouse recover their portion of the refund.
Wage Garnishment and Social Security Offsets
If you're working, the Department of Education can garnish up to 15% of your disposable wages without a court order.
If you're receiving Social Security benefits, a portion of those benefits may also be withheld to repay your student loans.
These offsets don’t happen overnight. You’ll receive a notice in the mail, and there may be a chance to request a hearing or set up a payment arrangement.
How to Protect Your Finances
Check Your Loan Status
Go to studentaid.gov to see if you're in default
Apply for an IDR Plan or Hardship Forbearance
Income-driven repayment plans may lower your payment to $0
Act Quickly
Once the offset is processed, it’s hard to reverse. Take steps before your refund is filed
Consider Adjusting Your W-4
If you're used to receiving large tax refunds, adjusting your withholdings could help reduce the amount at risk
Talk to a Tax Professional
Everyone’s situation is different. A tax pro can help you understand your risk and create a plan
Tax Strategy Tips for Borrowers
Make sure your filing status is chosen carefully if you’re married
Track your student loan interest for potential deductions
If you owe other debts too, prioritize which ones may impact your refund
File early if you’re worried about refund offsets
📞 Treasury Offset Hotline
If you believe your tax refund may be offset or you want to check the status of an offset, you can contact the TOP Call Center at:
☎️ 1-800-304-3107 (Toll-Free)
Available Monday through Friday
Hours: 7:30 AM to 8:00 PM Eastern Time
About the Author:
I’m Coach Ktasha (Tasha), a tax and business consultant dedicated to helping individuals and entrepreneurs navigate taxes, maximize deductions, and build strong financial foundations. My goal is to make tax season stress-free and provide you with the knowledge to make smart money moves all year long.
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