Treasury & State Offset Programs

Pursuant to statutory mandate, since 1986 the Department has referred millions of defaulted student loan debts and grant claims to the Department of the Treasury (Treasury) for collection by offset against federal and/or state income tax refunds and any other payments authorized by law. The Department can request that Treasury arrange an offset to collect any defaulted student loan debt or grant claim that is being serviced by the Department or on which the Department has made a reinsurance payment to a guaranty agency.

Federal law requires the Department to give you prior notice of the proposed offset and an opportunity to review loan/grant records, to demonstrate why the loan/grant is not in default or is not enforceable, and to avoid offset by arranging to repay the loan/grant. Notices are sent to you using the best address available to the Department, from all legally available resources, including the most recent address used by you in your most recent federal tax return. These opportunities are explained in detail in 34 C.F.R. Parts 30.20 to 30.33. You may use these opportunities after the deadlines explained in the notice; however, offset will not be delayed until resolution of your objections. Amounts collected in excess of the amount you prove to be due will be refunded by the Department. For federal income tax refund offsets, the amount subject to offset includes the amount of an earned income tax credit due you. Federal tax refunds payable to joint filing couples are subject to offset, as explained in the notice, but that portion of the refund owed to the non-debtor spouse can be recovered by that individual by filing an "injured spouse" claim with the IRS. Additionally, there are a number of other federal and/or state payments (e.g., Social Security benefits), which, as authorized by law, are also subject to offset under this program.

Guaranty agencies may also participate in state offset programs, independent from the Treasury Offset Program, to collect defaulted, federally-insured student loans by offset against state income tax refunds and/or other payments. The Department has no information about these particular collection actions, and questions about these actions must be directed to the guaranty agency taking the action.