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VERIFY: Can your tax return be seized for late student loan payments?

In a normal year, some Americans with defaulted student loans may not have received their tax returns. But the 2021 tax season is different.


Can your tax return be taken from you if you are behind on student loan payments?


In a normal year, yes. But because of the pandemic, there is a pause on defaulted loan collections for this 2021 collection.


  • Henry Grzes, Lead Manager for Tax Practice and Ethics with the American Institute of CPAs
  • A January 20th White House statement


In a normal year in the United States, if you default on a federal student loan, the Department of Education can take your tax return from the IRS before it gets to you. 

Henry Grzes tells us in these cases, the federal government alerts you that they plan to seize your tax return for outstanding payments. 

He says at that point, you have the opportunity to challenge it since it's not uncommon that the government made a mistake. They may have missed a name change, there may have been a computing error, or even missing paperwork.

"Loans are bought and sold. And the paperwork doesn't always follow that loan, so you do have the opportunity to challenge it," Grzes says. "But if you clearly are in default, and you meet all the terms, then they would have that right."

But during the pandemic, this practice has been suspended.

The Verify team reached out to the U.S. Department of Education to ask whether they plan to keep up that process for 2020 tax returns. They directed us to a January 20th White House statement, which says "At the request of President Biden, the Acting Secretary of Education will extend the pause on federal student loan payments and collections and keep the interest rate at 0%."

RELATED: VERIFY: Has President Biden proposed forgiving all federal student loan debt?

"There's a pause on any type of garnishment of one's federal tax refund," Grzes explains. "So an individual who has a 2020 tax return and files it today, even though they are in default, their refund can't be withheld from them."

Grzes says for now, this is in place until September 30 when, in theory, Americans will again need to start paying their student loans. Depending on the status of the pandemic at that point, the deadline may be moved again as it has been consistently since last year.

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