Say good-bye to your tax refund if you have past-due student loans.
In most cases, creditors are unable to touch tax refunds. Not so with student loans.
While credit card companies and other private debt collectors are barred from garnishing money coming to taxpayers from Uncle Sam, some federal and state creditors can help themselves to tax refunds via a process known as ‘offsetting.’ Under the Treasury Offset Program, these entities get a whack at your tax refund if you have an outstanding debt in certain categories, including:
- past-due child support payments
- back taxes
- any unemployment compensation owed to the state
- past-due student loans
This is another reason to pay your student loans on time, or better yet, make sure you only take on as much debt as you can afford to pay back.