Student loans are back in repayment, and starting in 2025, that also means that collection activity has resumed on student loan debt. Could your student loans cause you to see your tax refund garnished?

According to data from the Department of Education, around seven million borrowers have defaulted on their student loans. Those who are in default could risk having their tax refund seized come tax time.

You might be planning on getting a tax refund in 2025 but if you’re in default 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 Student Loans Take My Refund in 2025?

During the pandemic, the government froze student loan payments. It also paused collections on past payments due from accounts that were in default. Now that student loans are back in repayment, your tax refund could be seized if you’re behind on your student loans.

Your account is considered in default if you haven’t made a payment on your federal student loans in 270 days. When that happens the Department of Education can garnish your tax refund to offset missed payments.

To help borrowers in default, the government created the Fresh Start program. The program is designed to help return borrowers to good standing, avoiding the risk of garnishments. Enrollment in the program ended in October 2024.

If you missed the deadline and your loans are in default, you could face garnishments beginning in 2025 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 won’t be seized but your debt could be sent to collections and your credit score will likely take a hit.

If your private lender does sue you, they could win a judgement against you and attempt to collect your tax refund that way.

Related: Why Strategic Default On Your Student Loans Is A Bad Idea

What Is Student Loan Refund Tax Garnishment?

A student loan refund tax garnishment is technically called a tax refund offset. This can happen when you’ve defaulted on your student loans but are owed a tax refund. Instead of receiving your refund, it will be garnished to offset delinquent student loan payments.

If you find yourself in a situation where your tax refund could get garnished, you should receive a notice in the mail from the Treasury Offset Program’s Bureau of the Fiscal Service – rather than the IRS. This notice should come 65 days before your refund is going to be seized. However, receiving this notice may not happen if your address or other personal information is incorrect or outdated.

The notice will have information about how to contest the garnishment if you think there’s an error. Borrowers can contest a tax refund offset for a number of reasons including:

You may be required to provide payment records or court documents to contest an offset.

Garnishment isn’t limited to the current tax year. If a tax offset is initiated, future refunds could also be seized.

Depending on your situation, you may qualify for a student loan offset hardship refund. Acute instances of economic hardship include using your refund to cover rent to avoid eviction or using your refund to avoid utilities from being disconnected.

Borrowers that qualify for an economic hardship may be able to recover some or all their garnished tax refund. For example, if you demonstrate you have a $2,000 hardship and your refund is $5,000, you’ll receive $2,000 to cover your hardship expenses while the remainder of your refund will be garnished.

Contact the Treasury Offset Program to obtain the appropriate forms to apply for a hardship refund.

What to Do to Avoid Defaulting on Your Student Loans

The best way to prevent student loans from taking your tax refund is to avoid defaulting on your student loans. To avoid default you can:

Borrowers who are already in default and missed the Fresh Start deadline can enter into student loan rehabilitation. Rehabilitation allows borrowers to return to good standing after nine on-time payments during a 10-month period. If you can make at least five of those payments, you can avoid a tax refund garnishment. 

Defaulting on your student loans can adversely affect your credit. 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. Successful completion of a rehabilitation agreement can eliminate the default from your credit report.

What Happens if I Owe Student Loans but Am Not in Default?

Owing money on your student loans doesn’t mean you’re automatically in default. The government considers you to be in default if you miss payments for 270 days.

While defaulting on your student loans can initiate a tax refund offset, so can missing a child support payment, failing to pay your taxes, or defaulting on a Small Business Administration Loan.

Your tax refund won’t be at risk if you’re current on your student loan payments. Stay on top of your payments to avoid the risk of going into default and potentially losing your tax refund.