Quick overview
A student loan offset means your federal tax refund is reduced or taken to repay overdue federal student loans. The Bureau of the Fiscal Service runs the Treasury Offset Program (TOP) at the request of the U.S. Department of Education; the IRS/Treasury applies the offset to refunds. (U.S. Department of Education; Bureau of the Fiscal Service) See steps below to check, dispute, and avoid offsets.
How the offset process typically works
- Loan status: Most federal loan programs are considered in default after prolonged nonpayment (for many loans, default is generally declared after 270 days of missed payments) — check your account at Federal Student Aid. (Federal Student Aid, U.S. Dept. of Education)
- Referral to TOP: The Department of Education or guaranty agency can refer a defaulted loan to the Treasury Offset Program. TOP then matches collection files against federal payment streams, including tax refunds. (Bureau of the Fiscal Service)
- Notice and timing: You normally receive notices from your loan servicer or the Department of Education before collection efforts. If an offset occurs, you should get an explanation showing the collected amount and the creditor agency.
Who is affected
Any borrower with federal student loans in default (including Direct Loans, FFEL, and Perkins loans in certain circumstances) can be subject to a refund offset. Joint filers may see their entire refund offset even if only one spouse has the debt; an injured‑spouse claim (IRS Form 8379) may recover the other spouse’s share. (IRS)
Immediate steps if you expect an offset or your refund was reduced
- Confirm your loan status: Sign in to your Federal Student Aid account at studentaid.gov or contact your loan servicer to confirm the debt and the entity referring it for offset. (Federal Student Aid)
- Review notices: Keep the Department of Education/Treasury correspondence. The offset notice explains the debt and how to dispute it.
- If you believe the debt is incorrect or already paid/discharged: Contact the Department of Education and your loan servicer immediately and ask for a review. If you can’t resolve it, file a written dispute and keep copies of all documentation.
- If you filed a joint return and only one spouse owes: File IRS Form 8379 (Injured Spouse) to claim your share of the refund. The IRS has guidance on this form and process. (IRS Form 8379)
- If the offset already happened and you believe it was an error: Ask the Department of Education for a refund of the offseted funds; also contact the Bureau of the Fiscal Service (TOP) and keep records of all communications.
How to prevent future offsets
- Exit default: Get current by rehabilitating or consolidating the loan. Loan rehabilitation usually requires a series of on‑time, agreed monthly payments (commonly nine payments over ten months); consolidation options vary by program and servicer—check studentaid.gov for exact requirements. Successful rehabilitation or approved consolidation removes the default status and stops further offset referrals. (Federal Student Aid)
- Make payments: Enter a repayment plan and maintain payments. For borrowers facing hardship, an income‑driven repayment plan or temporarily approved forbearance may help, but be aware that forbearance or IDR enrollment doesn’t automatically prevent collection actions already in progress.
- Stay on top of communications: Confirm contact details with your servicer so notices reach you before the offset happens.
If you need help or alternatives
- Appeal or dispute errors with the Department of Education and the Treasury TOP office. The Bureau of the Fiscal Service maintains TOP contact information and process details. (Bureau of the Fiscal Service)
- For consumer protections and guidance on student loan collections, the Consumer Financial Protection Bureau offers step‑by‑step advice. (CFPB)
- If you’re unsure which option fits you, consult a tax professional, housing or consumer‑law attorney, or a HUD‑approved nonprofit counseling agency. This article provides educational information, not legal or tax advice.
Related resources on FinHelp
- How Tax Refund Offsets Work for Federal Student Loan Defaults — learn the technical process and borrower protections: https://finhelp.io/glossary/how-tax-refund-offsets-work-for-federal-student-loan-defaults/
- Steps to Rehabilitate a Defaulted Student Loan — practical steps to restore good standing and stop offsets: https://finhelp.io/glossary/steps-to-rehabilitate-a-defaulted-student-loan/
- What to Do When the IRS Offsets Your Tax Refund — actions to take if the IRS or Treasury applies an offset: https://finhelp.io/glossary/what-to-do-when-the-irs-offsets-your-tax-refund/
Authoritative sources and further reading
- Federal Student Aid, U.S. Department of Education — studentaid.gov (loan status, rehabilitation, consolidation)
- Bureau of the Fiscal Service — Treasury Offset Program (TOP) — fiscal.treasury.gov/top/
- IRS — Form 8379 (Injured Spouse Allocation) and Where’s My Refund? pages — irs.gov
- Consumer Financial Protection Bureau — consumerfinance.gov
Professional disclaimer
This entry is educational and reflects general practices and government program rules as of 2025. It does not replace personalized legal, tax, or loan‑advice. For decisions that affect your tax refund or loan status, consult a qualified tax advisor, attorney, or your loan servicer.
