Ed. Dept. Will Not Use Tax Refunds, Social Security to Collect on Defaulted Student Loans Until November

The Department of Education has announced it will suspend the seizure of tax refunds, Social Security payments, and other government payments to collect on defaulted student loans through November. The announcement comes a week after the Education Department said it would not seize child tax credit payments sent to individuals to cover unpaid student loan debts as well.

Student loan debt payments are scheduled to resume May 1, so whether this means that they will be paused again until November or just that government payments won’t be seized to cover defaulted student loans until November remains to be seen. Student loan payments have been on hold for nearly two years due to the COVID-19 pandemic.

The seizures are conducted through the Treasury Offset Program, which is run by the Treasury Department. The program allows the government to seize 100% of an individual’s tax returns to collect on certain unpaid debts owed to the government, and up to 65% of an individual’s Social Security payments. In 2019, the offset program collected nearly $5 billion in unpaid student loans. About 9 million individuals are in default on their federal student loans, according to a published report.

How individuals will resume making student loan payments has been a topic of conversation for months, given the complexity and size of the system. At the same time, there are growing calls for the federal government to cancel some or all of the outstanding student loan debt as a means of boosting the economy and giving those struggling with their payments a fresh start.

“The intent of these social safety net programs is to protect and prevent people in the U.S. from experiencing crushing poverty — not a reconciliation system for the federal government to use for the student loan portfolio,” said Abigail Seldin, who runs a charitable foundation that focuses on access to public services, in a published report.

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