The tax offset process is triggered when a defaulted borrower fails to maintain an agreed-upon payment schedule. Failure to maintain payments on a defaulted loan may result in your income tax refund being applied as an involuntary payment on your account. Below are questions about the tax offset process and EDFUND’s response.

Why is EDFUND taking my tax refund?
The tax offset process is a last resort exercised by EDFUND when neither the lender nor EDFUND has been able to make arrangements with a borrower to set and maintain a repayment schedule.

Borrowers have many opportunities to seek assistance when they encounter difficulty repaying their student loan(s). Borrowers who become delinquent on repayment of their loans with their lender have the opportunity to seek deferments and/or forbearance. Borrowers who go into default still have the opportunity to negotiate repayment arrangements with EDFUND or its agencies.

The offset process, by which the borrower’s tax refund is redirected to payment of their student loan debt, occurs only when a borrower has defaulted and failed to take advantage of his or her opportunities to make and honor repayment arrangements. Once a borrower becomes eligible for the tax offset process, he or she will continue to have future refunds offset until his or her defaulted student loan account(s) is paid-in-full.

If I have already made repayment arrangements and I am currently making payments toward my defaulted student loan(s), why is EDFUND still taking my tax refund?
Your loan may still be subject to tax offset if you failed to make payments on schedule or if your repayment arrangements were made after the deadline listed on the offset letter sent to you. As a result, you remain eligible for the tax offset process until your loan(s) is paid-in-full.

My spouse is the one with the defaulted student loan, so why is there a lien on my taxes?
If you live in a community property state such as California, and you file for a joint return with your spouse, his/her federal income tax refund may also be offset towards your student loan account, even if the student loan was incurred prior to marriage.

Community property states include: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Oregon, Texas, Washington and Wisconsin.

If my spouse is the one with the defaulted student loan, what can I do to keep my income tax refund from being used as a payment against his/her loan?
A taxpayer who files a joint return with a spouse who owes the debt may receive his or her share of the federal tax refund by filing IRS form number 8379 with the federal government.