Your Unpaid Student Loan Could Cost You Your Tax Refund

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You anticipated a large refund on your taxes to pay off some bills and put some money away in a rainy-day fund. Unfortunately, the money never showed up. What happened?

Your refund may have gone toward an unpaid bill selected by the government – your unpaid student loan.

Your federal student loan is considered to be in default if you haven’t made a payment in 270 days. When that happens, the federal government has the right to claim your tax refund as payment against the debt, in a process known as an administrative offset. In essence, the government isn’t giving any tax refunds back to you if you aren’t attempting to repay what you already owe the government.

If you’ve lost a tax refund to an offset, you aren’t alone. Student loan default rates are near 11%, giving the government plenty of offset targets. In fiscal 2017, the Treasury Department executed $2.6 billion in tax refund offsets on approximately 1.3 million

Refund Advance Loans And Refund Anticipation Checks 101

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Are you counting on your tax refund to pay off bills? You may need the cash before your refund arrives.

The IRS website states that typical refunds take less than 21 calendar days if you e-filed your return. However, if you are claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) your refund may be delayed further.

Tax preparers may offer a solution in the form of refund advance loans (RALs) and refund anticipation checks (RACs). What’s the difference between the two, and is either one right for you?

Refund advance loans are just what they sound like – a loan issued by a lender for the amount of your anticipated tax refund. You are loaned the money up front and your refund is used against the loan balance.

Predatory, older-style RALs were basically eliminated by rule changes in 2010 and 2012 due to high interest rates and other charge…