How to Stop Student Loan Tax Garnishment

If you’re already behind on federal student loans, it’s totally normal to worry that your tax refund might disappear before it ever hits your bank account. Let’s walk through what’s actually happening in early 2026 and the real steps you can take to protect future refunds and get out of default.

2026 Update

As of early 2026, the U.S. Department of Education has temporarily delayed many involuntary collection activities on defaulted federal student loans — including Treasury Offset Program (TOP) tax refund offsets and administrative wage garnishment — while it rolls out new repayment options under the Working Families Tax Cuts Act.

That means that many borrowers in default may not have refunds offset for student loans during the current delay—but refunds can still be offset for other eligible debts.

Need help reviewing your situation? You can call our sponsor, CareConnect USA, at 888-201-0431. They can help you understand potential student loan relief options and next steps.

Quick Guide: Which Situation are You In?

Use this to jump to the part that fits you best:

“I’m behind but not in default yet.” You’re getting late notices, but you haven’t been told your loans are in default or moved to a default servicer.
→ Skip to If you’re not in default yet: Use IDR to protect your refund.
“I’m in default and I just got a scary notice about my tax refund.” You received a letter saying your refund may be taken to pay your loans.
→ Go to If you’re already in default: Your 65‑day window after the notice.
“My refund was already taken.” You filed your return and learned that your refund was applied to your student loan debt.
→ Head to If your refund was already taken: What you can and can’t fix.

If you aren’t sure what your status is you, you can always call the official TOP phone line for checking offset status at 1-800-304-3107. And remember, no matter where you’re starting, you still have options. Let’s break this down.

How Student Loan Tax Garnishment Works

When people talk about student loan tax garnishment, they’re usually talking about a tax refund offset for defaulted federal student loans.

Here’s what’s really going on behind the scenes:

For defaulted federal student loans, refund seizure happens through the Treasury Offset Program (TOP), which is run by the Bureau of the Fiscal Service at the U.S. Department of the Treasury.
Your loan holder (usually the U.S. Department of Education or one of its contractors) asks the Treasury to intercept your federal tax refund and send it toward your defaulted loan.
This is legally different from an IRS levy for unpaid income taxes, even though it feels similar when your refund disappears.

To keep things accurate, this article will use “tax refund offset through the Treasury Offset Program (TOP)” at least once, but we’ll also use plain‑language terms like “tax refund seizure” or “tax garnishment” so you don’t have to remember the jargon.

If you want to see how TOP works in official language, you can look at the Treasury Offset Program overview and the Fiscal Service’s page on federal student loans and TOP.

You Should Get a Notice

Before your federal tax refund is offset for defaulted federal student loans, you should receive a written notice from your loan holder or another creditor agency.

This is often called a “Notice of Intent to Offset” (or something very similar), and it usually comes from the Department of Education or its contractor.

That notice should:

Tell you that your loan is in default.
Explain that the government plans to use your federal tax refund to collect on the debt.
Tell you roughly how much you owe.
Explain your rights — like the right to review records, dispute the debt, or set up a new repayment arrangement.

You’ll usually have about 65 days from the date of that notice to act before offsets begin.

Don’t ignore that letter.

That notice is your warning that your refund could be taken — and it’s also your best chance to stop future offsets by getting into a new payment arrangement.

For more detail in official terms, you can read the Treasury and Federal Student Aid guidance on default and Treasury offset at StudentAid.gov’s default article.

What You Need to Do

The first thing you need to do is figure out if you are currently in default. Before you can protect your refund, you need to know which bucket you’re in:

You’re probably not in default yet if:

Your account shows as current or delinquent but not “default.”
You’re still working with your regular loan servicer, not a default specialist or collection agency.
You haven’t received any letters saying your loans are in default or that your account has been assigned to a default servicer.

You’re likely in default if:

You’ve been told your loans are in default or in collections.
You’ve received a “Notice of Intent to Offset” or a similar letter warning that your tax refund and wages may be taken.
Your loans have been moved to a default servicer or collection agency instead of your original servicer.

Knowing where you stand helps you focus on the right next step:

Already in default? Focus on getting out of default with rehabilitation, consolidation, or a repayment agreement.

Not in default yet? Focus on keeping the loan current with an affordable plan.

If You’re Not in Default Yet, Try IDR

If your loans are behind but not in default yet, the main goal is to keep them from ever reaching default so TOP and wage garnishment never come into play. The best tool for most low‑income borrowers here is an income‑driven repayment (IDR) plan.

Repayment options are in flux heading into July 1, 2026, so confirm the available IDR/RAP options on StudentAid.gov.

You usually need to be out of default to newly enroll in most IDR plans, which is why this is so powerful before things spiral.

If this is you, your next move is simple:

Log in to your account at StudentAid.gov.
Start an application for an income‑driven repayment plan.
Contact your servicer and tell them you’re applying so they can help you stay on track.

For a deeper dive into these plans and how they work, check out Low Income Relief’s guide to Student Loan Debt Relief.

Staying current with IDR is the easiest way to avoid both tax refund offsets and wage garnishment altogether.

If You’re In the 65 Day Window, Act Fast

If you’ve already slipped into default and received a pre‑offset notice, you’re in that stressful 65‑day window where it feels like everything is on the line.

Let’s be clear about one big myth: Making a single payment before garnishment does not automatically stop a tax refund offset.

What matters is whether you enter an approved arrangement — like rehabilitation, consolidation, or a repayment agreement — and, when required, make the first payment within that notice window.

Here are your main options after that notice arrives.

Option 1: Rehabilitation

Loan rehabilitation is a one‑time chance (which will be updated to include a second chance for many borrowers under the new reforms) to bring a defaulted federal loan back into good standing.

Key details, based on current Federal Student Aid guidance:

You and the holder of your loan agree on a reasonable and affordable payment amount.
In most cases, you must make nine voluntary, on‑time monthly payments within ten consecutive months.
The standard “reasonable and affordable” payment is often calculated as up to 15% of your discretionary income, where discretionary income is your adjusted gross income (AGI) minus 150% of the federal poverty guideline for your family size, divided by 12.
If that amount is still too high, you can fill out a Loan Rehabilitation Income and Expense form and document your monthly expenses. That may be able to bring your payment down even farther.

Once you complete rehabilitation:

Your loan is no longer in default.
Collection tools like TOP tax refund offsets and administrative wage garnishment should eventually stop on that loan.
Your loan is transferred back to a regular servicer, and you can then enroll in an IDR plan to keep payments affordable going forward.

Option 2: Consolidation into a Direct Consolidation Loan

Another way out of default is consolidation into a Direct Consolidation Loan.

To use this path, you typically must:

Consolidate your eligible defaulted loans into a new Direct Consolidation Loan, and
Agree to repay the new loan under an income‑driven repayment plan or another acceptable repayment plan.

Consolidation can be a good fit if you:

Want to clean up multiple loans into a single payment.
Prefer to move into IDR quickly rather than working through nine rehabilitation payments.

Option 3: Repayment Agreement with the Holder

In some cases, your loan holder may allow you to avoid or stop offsets by:

Entering a repayment agreement and
Making the first payment within about 65 days of the pre‑offset notice.

This route is more situational and depends on what the holder offers you, but the big idea is the same: you need an official arrangement, not just a one‑off payment.

If Your Refund Was Already Taken, Do This

Finding out your refund is gone is gut‑wrenching, especially when you were counting on that money for rent, food, or bills.

Here’s the hard truth: in most cases, once a specific year’s refund has been offset and applied to your student loan debt, you can’t get that money back.

The main exception is if you file an Injured Spouse claim on a joint tax return, and part of the refund belonged to the spouse who doesn’t owe the student loan debt. In that case, the non‑debtor spouse may be able to reclaim their portion. If you think that applies to you, talk to a tax professional or legal aid about whether an Injured Spouse Allocation makes sense in your situation.

However, this is a good time to take action to make sure your future tax refunds aren’t in jeopardy. You can still contact the loan holder immediately and ask about your options. Use this as a turning point to get out of default so future years don’t repeat the same pattern.

Also, if money is already tight, try not to spend a lot on tax prep you can’t afford. Low Income Relief has a full guide to How to Get Cheap or Free Tax Filing – Master List! that can help you file without huge fees.

The bottom line here: you usually can’t undo the past offset, but you have a lot of control over what happens with next year’s refund and beyond.

Other Payments the Government Can Take

Tax refund offsets are just one of the tools the government can use when federal student loans are in default. Others include:

Administrative Wage Garnishment (AWG): Taking a portion of your paycheck without a court order.
Offsets of certain federal benefits: In some cases, part of benefits like Social Security can be taken to repay defaulted loans.

These tools can sometimes be used at the same time — for example, you could face both wage garnishment and a tax refund offset if your loans stay in default long‑term.

If you’re worried about wage garnishment specifically, be sure to read Low Income Relief’s companion guide, How to Stop Student Loan Wage Garnishment. That article walks through the 30‑day wage‑garnishment notice, hearing rights, and how rehabilitation fits into that process.

All of these issues share the same core solution: get out of default through rehabilitation, consolidation, or a new repayment agreement, and then use IDR to keep things manageable.

Relief Recap

If you’re behind on federal student loans, the most important thing to know is this: you still have options, and you’re not stuck. Even though the Department of Education has temporarily delayed many involuntary collections in early 2026, that pause won’t last forever — and the safest move is to use this time to get into a better position.