How to keep my tax return from fed student loan debt collectors? for Questionland Seattle

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How to keep my tax return from fed student loan debt collectors?

I am in default on two federal student loans, Sub-Stafford Loan and a Federal Perkins Loan (combined total ~$16,000) .

I spent 13 weeks last year (2009) unemployed, I have no savings, I may be forced to move in July per lease agreement. I am afraid the loan people will try to get my Income Tax Return from the IRS this year.

I've just come back to full time employment, I started right before x-mass. What should my plan of action involve to be able to keep my income tax return which will help afford moving into a new cheap place.

internet_jen asked in Finance/Insure/Legal over 2 years ago | Report

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asteria

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I had this exact same situation a few years ago - the only way you can keep your refund is to call the loan people and start paying ASAP. You are also running the risk of having your wages garnished if you don't get on top of this.

Unfortunately because you are in default you won't qualify for the Income Based Repayment plan right now. I was tracked down by the loan collection people, and they helped me set up an automatic $50 a month payment on my loan that was charged to my credit card. I was only working part time, had credit card debt and adding this charge sucked, but it was better than losing my refund every year. You have to make payments for at least 9 months to get out of default status, but I think once you start making payments they won't seize your refund this year.

Make sure you ask when they will stop seizing your refund when you call, because the good news is that as long as you are owed a refund there is no penalty for filing late (see "Losing your refund" on this IRS Fact Sheet ). Do fill out your 1040 whatever to make sure you are getting a refund and then hold onto it a few more months or up to 3 years if necessary so you can get your refund.

Call the loan people. I think you can try 1-800-848-0979, Direct Loan Servicing , if you haven't saved one of the many letters in ALL CAPS from the collections people. Once you are out of default you will qualify for consolidation or IBR, or deferment if you go back to school or are below the poverty line.

asteria answered in Finance/Insure/Legal over 2 years ago | Report

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Educate yourself about your student loans. You have federal loans, not private ones, so you have some options.

1. Consolidate your loans if you haven't done so. This will likely lower your interest rate overall, and could lower your payment (through increasing your repayment period). I consolidated my loan about 5 years ago, and, sure, I have $40k in debt and will pe paying until I have grandchildren, but my monthly payment is $230.
2. Usually with the federal loans, you can apply for a deferral. There are various sorts: hardship/unemployment, in school, etc. You can also, I'm pretty sure, just *ask* for a deferment for a year, and take up to three years (over the life of the loan) in deferrals that aren't for a specific reason.
ALSO: thing to know about deferrals -- they don't show up on your credit history. Your loan just looks like it's being paid monthly, on time, while its in deferral.

Call your current loan holder, and see what's up.

MyrnaMinkoff answered in Finance/Insure/Legal over 2 years ago | Report

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How long were you in default for? I am also in a very bad situation and need the money. I only owe about $3000 but have been in default since 2007. I am so worried they are going to take it but I barely make enough to live on and my car has officially gone to car heaven.

N.Leonard answered in Finance/Insure/Legal over 2 years ago | Report

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I had my return taken last year while unemployed. Then when I got a full time job the loan people contacted me in August and set me up for a repayment plan, but because of the default status they said I will still have my return taken this year, but in 2011 I will be out of default and get my full return. I know it sucks, but I look it as an extra payment to get me out of debt sooner.

Enigma answered in Finance/Insure/Legal over 2 years ago | Report

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Yah, the place you want to contact is

http://www.ibrinfo.org/

Kristin Bell answered in Finance/Insure/Legal over 2 years ago | Report

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Contact them and try to work out a payment plan. There's a new federal program that allows you to pay back a reasonable amount based on your income over a longer stretch of time. Depending on what your job is (i.e. if you work in the public service/non-profit sector), your loan will be completely forgiven after 10 years, regardless of whether or not you've fully paid it off and provided you've been making regular payments. I can't remember the website, but you should try and look into it.

In most cases, if you talk to them, they're usually willing to work something out, particularly now that you're actually working and can pay them something.

j_lee answered in Finance/Insure/Legal over 2 years ago | Report

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