Student loans are back on the ante, and starting in 2026, that means too Student loan debt collection activity has resumed. Could your student loans cause you to see your tax refund garnished?
According to data from the Ministry of Education, about Seven million borrowers They have defaulted on their student loans. Those who default can risk having their tax dollars confiscated at tax time.
You may be planning to get a tax refund in 2026, but if you’re behind on your federal student loans, your refund could be at risk. Here’s what you need to know about how tax refund garnishments work and how to stay out of default to avoid losing your refund.
Will my student loans take my refund in 2026?
During the pandemic, the government froze student loan payments. It also temporarily stopped collecting past due payments from accounts that were in default. Now that your student loans are back in repayment, your tax refund could be confiscated if you default on your student loans.
Your account is considered in default if you don’t make a payment on your federal student loans within 270 days. When this happens, the Department of Education can garnish your tax refund to make up for missed payments.
This means you could face garnishments starting in 2026 on both your federal and state tax refunds.
Tax garnishments only apply to federal student loans. If you have private student loans that are in default, your tax refund will not be confiscated but your debts could be sent to collections and your credit score will likely be affected.
If your lender sues you, they may win a judgment against you and try to collect your tax refund that way.
Related to: Why strategically defaulting on your student loans is a bad idea
What is a student loan recovery or garnishment tax offset?
A tax garnishment for a student loan refund is technically called a tax refund offset. This can happen when you default on your student loans but are owed a tax refund. Instead of receiving a refund, it will be held to offset late student loan payments.
If you find yourself in a situation where your tax refund could be withheld, you should receive notice in the mail from Office of the Treasury Compensation Program for the Financial Service – Instead of the IRS. This notice must come 65 days before your refund is forfeited. However, this notice may not be received if your address or other personal information is incorrect or out of date.
The notice will contain information on how to dispute the booking if you think there has been an error. Borrowers can object to a tax refund offset for a number of reasons including:
You may be asked to provide payment records or court documents to dispute compensation.
Withholding is not limited to the current tax year. If a tax offset is initiated, future refunds may also be forfeited.
Depending on your situation, you may be eligible for a student loan hardship refund. Severe cases of economic hardship include using your refund to cover rent to avoid eviction or using your refund to avoid disconnecting utilities.
Borrowers who qualify for economic hardship may be able to receive some or all of their tax refunds. For example, if you prove you are experiencing a hardship of $2,000 and your refund is $5,000, you will receive $2,000 for hardship expenses while the rest of your refund will be withheld.
Call me Treasury clearing program To obtain the appropriate forms to apply for hardship recovery.
What to do to avoid defaulting on your student loans
The best way to prevent student loans from being a tax refund is to avoid defaulting on your student loans. To avoid the default you can:
Borrowers who have already defaulted and missed the Fresh Start deadline can enter student loan rehabilitation. The rehabilitation process allows borrowers to return to good standing after nine on-time payments over a 10-month period. If you can make at least five of these payments, you can avoid withholding your tax refund.
Defaulting on your student loans can negatively impact your credit score. When a default is reported to the credit bureaus, it can follow you for years and affect your ability to buy a car or get a mortgage. Successfully completing a rehabilitation agreement can remove the default from your credit report.
What happens if I owe student loans but am not in default?
Having money on your student loans doesn’t mean you automatically default. The government considers you in default if you miss payments for 270 days.
While defaulting on your student loans can result in a tax refund offset, it could also result in missing a child support payment, failing to pay taxes, or defaulting on an SBA loan.
Your tax refund will not be at risk if you are committed to making your student loan payments. Stay on top of your payments to avoid the risk of default and potentially losing your tax refund.
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