What is happening with student loan offsets right now
The federal government is currently offsetting tax refunds to collect on defaulted federal student loans. This means the IRS can intercept your refund and send it to the Department of Education to pay down student loan debt you owe. This practice has been in effect continuously, though the rules and which loans may have access to have shifted over time.
As of 2026, the offset program applies to loans held by the federal government that are in default status. The most common loans subject to offset are Direct Loans, Federal Family Education Loans (FFEL), and Perkins Loans. Private student loans cannot be offset through the tax refund system — only federal loans can.
If you have federal student loans in default, you should assume your refund is at risk of offset unless you have taken specific action to stop it. The offset happens automatically when the IRS processes your return and matches your Social Security number against the Department of Education's list of borrowers in default.
Key Takeaways
- The IRS offsets federal tax refunds to pay defaulted federal student loans, and this is happening in 2026 for loans held by the Department of Education.
- Only federal student loans in default status trigger offsets; private loans and loans in deferment or forbearance are not subject to this process.
- You can check whether your loans are in default by logging into StudentAid.gov or calling the Federal Student Aid Information Center at 1-800-4-FED-AID.
- Rehabilitating your loan or consolidating it into an income-driven repayment plan can stop the offset, though the process takes time and does not recover a refund already taken.
- If your refund is offset, you will receive a notice from the IRS and a separate notice from the Department of Education explaining the amount taken and which loan it paid toward.
Which federal student loans trigger offsets
Direct Loans and FFEL loans in default are the primary targets for offset. A loan enters default status when you have not made a payment for 270 days (about nine months). Once in default, the loan becomes may be able to access for offset regardless of how old the debt is — there is no statute of limitations on federal student loan collection.
Perkins Loans, which were issued through schools rather than directly by the federal government, are also subject to offset if they are in default. However, Perkins Loans are no longer being issued as of 2024, so the number of Perkins Loans in default is shrinking.
Loans in deferment or forbearance are not subject to offset, even if you have not been making payments. The key distinction is default status — the loan must be formally in default for the offset to occur. If you are behind on payments but have not yet reached 270 days of non-payment, your loan is not yet in default and will not trigger an offset.
How to learn about your loans are in default
Log into StudentAid.gov using your FSA ID. This is the official federal student aid portal, and it shows the status of every federal loan you have. Look for the loan status field — it will say "In School," "Grace Period," "Repayment," "Deferment," "Forbearance," or "Default." If any loan shows "Default," that loan is at risk of offset.
If you cannot access StudentAid.gov or prefer to speak with someone, call the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243). They can tell you the status of each loan and which ones are in default. Have your Social Security number ready.
You can also check the National Student Loan Data System (NSLDS) at nslds.ed.gov, which is a read-only database showing all your federal student loans and their status. This does not require an FSA ID and can be a quick way to see the big picture of your loans.
How the offset process works and when it happens
When you file your federal tax return, the IRS cross-checks your Social Security number against the Department of Education's offset list. If your name and number match a borrower with a defaulted federal loan, the IRS holds your refund and sends it to the Department of Education instead of to you. This happens during the normal tax processing cycle, which typically runs from February through May, though refunds can be processed year-round.
You will receive two notices: one from the IRS (usually a letter explaining the offset) and one from the Department of Education (showing which loan was paid and the amount applied). These notices typically arrive within two to four weeks after your refund would normally have been issued. The notices will include the loan servicer's contact information so you can follow up on your account.
The offset amount goes directly to reduce your loan balance. It does not go toward current payments or fees — it reduces the principal owed. If you have multiple loans in default, the offset is typically applied to the oldest loan first, though this can vary by servicer.
How to stop an offset before it happens
The most direct way to stop an offset is to bring your loan out of default status. You can do this through loan rehabilitation or loan consolidation.
Rehabilitation requires you to make nine on-time monthly payments (the amount is calculated based on your income and family size, and can be as low as $5 per month). Once you complete nine payments, the loan is removed from default status and the offset may be able to access ends. However, rehabilitation can only be used once per loan, and it does not erase the default from your credit report — it only removes the default status going forward. The process takes about ten months from your first payment.
Consolidation into a Direct Consolidation Loan stops the offset immediately and puts you into an income-driven repayment plan. This is faster than rehabilitation and can lower your monthly payment, but it combines all your loans into one new loan and restarts the repayment clock. You can consolidate through StudentAid.gov or by calling 1-800-557-7392.
If you believe the offset is in error — for example, if you already rehabilitated the loan or if the debt belongs to someone else — you can file a dispute with the Department of Education's Ombudsman office. This process takes time and does not stop the current offset, but it can recover money if the offset was wrongful.
What happens after your refund is offset
Once your refund is offset, you cannot recover it through the IRS. The money has been transferred to the Department of Education and applied to your loan. However, the offset does reduce your loan balance, which lowers the total amount you owe.
If you were counting on that refund for expenses, you have limited options. You cannot reverse the offset or ask for the money back. Your only recourse is to dispute the offset if you believe it was in error — for example, if the loan was not actually in default or if the debt is not yours.
Going forward, if you bring your loans out of default status, future refunds will not be offset. If you enter an income-driven repayment plan or rehabilitation, your loans will no longer be in default, and the offset will stop.
Frequently Asked Questions
Can I get my refund back after it has been offset?
No, once the IRS has sent your refund to the Department of Education, you cannot recover it through the IRS. The money is applied to your loan balance. Your only option is to file a dispute if you believe the offset was in error — for example, if the loan was already rehabilitated or if the debt is not yours.
Will offsetting my refund hurt my credit score?
The offset itself does not hurt your credit score — your credit report will not show a new negative mark because of the offset. However, if your loan is in default, that default is already on your credit report and has already damaged your score. Bringing the loan out of default through rehabilitation or consolidation will eventually help your credit recover.
What if I have both federal and private student loans in default?
Only federal student loans can be offset through the tax refund system. Private loans cannot be offset by the IRS. However, private loan servicers can pursue other collection methods, such as wage garnishment or lawsuits. Focus on federal loans first to stop the refund offset.
Can I claim my spouse's refund if we file jointly?
If you file a joint return and only one spouse has a defaulted federal loan, the IRS will offset the entire refund to pay that debt. Your spouse cannot protect their portion of the refund. To avoid this, you can file separately, though this may cost you in tax benefits. Consult a tax professional before changing your filing status.
How long does it take to rehabilitate a loan and stop the offset?
Rehabilitation takes about ten months from your first on-time payment. You must make nine consecutive on-time monthly payments, and the ninth payment must be received by your loan servicer before the loan is officially removed from default status. Once removed, future refunds will not be offset.