I have a friend that is having a problem with his Student loans. He basically is in default on his lona about $10,000 balance. He has been paying religously since May 15th of 2005 approx $200/ mo. They say he will be out of default after his May payment. The problem is that last year they also took his tax refund. It was approx $2,000. He is now maried with a child and his Tax refund is going to be a bit more, approx $3,500 and he really needs it. He called up and said until he was out of default , they were intitled to the refund. One person at the CO suggested that he file an extention. will that work or do they just get the refund no matter when it is filed...?? also are there any hardship clauses to prevent them from taking the refund. He only makes about $34,000 gross and has paid them about $4,200 this year so far. l
If you are in an agreed upon payment arrangement with the guarantee agency, Department of Education, or collection agency, then there should be no intercept. Is there anything in writing regarding the repayment of this defaulted loan? My husband and I both did a Direct Loan when we were in default with the guarantee agency, and although it doesn't wipe the default off the credit report (you have to rehabilitate the loan for 12 months for that to occur) , it does get the guarantee agency or collection agency off your back, and it gives you lots of repayment options that are much more affordable. You also get the tax intercept to stop. The direct loan website is www.ed.gov/DirectLoan BTW, why wasn't any adjustment made for deductions for taxes, if they knew taxes would be intercepted? I would just have the employer withold the absolute minimum for taxes to avoid having my money taken. A tax refund is basically you giving an interest free loan to the government....but some people enjoy getting that big check. I'd rather keep it throughout the year, since it's my money.
I had a similar problem. What we did was to File under my wifes name as head of household.Since she was the main bread winner..We,ve never had any problems getting the entire amount back.Its really good to since we get the EITC for 2 kids.. I had a friend in a similar situation and they filed an Injured spouse Setup..They at least got half the amount back.
