Student loans, tax returns: will student loans be carried over to 2021?
In a typical year, some Americans with past due student loans may not have received their tax return. But the 2021 tax season is different.
Can Your Tax Return Be Withdrawn If You Are Late On Student Loan Payments?
In a normal year, yes. But because of the pandemic, there is a pause on overdue loan collections for this 2021 collection.
- Henry Grzes, Senior Director of Tax Practice and Ethics at the American Institute of CPAs
- A White House of January 20 declaration
In a typical year in the United States, if you fail to secure a federal student loan, the Department of Education may take your tax return from the IRS before it reaches you.
Henry Grzes tells us that in these cases, the federal government alerts you that it is considering entering your tax return for unpaid bills.
He says that at that point you have the opportunity to challenge it, because it is not uncommon for the government to have made a mistake. They might have missed a name change, a computer error, or even missing documents.
“Loans are bought and sold. And the paperwork doesn’t always follow that loan, so you have the option to dispute it, ”Grzes says. “But if you are clearly in default and you meet all the conditions, then they would have that right.”
But during the pandemic, this practice was suspended.
The Verify team reached out to the US Department of Education to ask if they plan to maintain this process for 2020 tax returns. They directed us to a White House on January 20. declaration, which says “At the request of President Biden, the acting Secretary of Education will extend the hiatus on federal student loan payments and collections and keep the interest rate at 0%.”
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“There is a pause on any type of garnishment of its federal tax refund,” says Grzes. “So an individual who has a 2020 tax return and files it today, even though they are in default, cannot be denied their refund.”
Grzes says that for now, this is in place until September 30, when, in theory, Americans will have to start paying their student loans again. Depending on the state of the pandemic at this point, the deadline may be extended as it has been since last year.