Treasury offset.
In plain English
Treasury offset is a federal collection tool, run through the Treasury Offset Program, that intercepts money the government would otherwise pay you and applies it to a past-due federal debt such as a defaulted student loan. The most common offset is your federal income tax refund, but certain other federal payments, including some Social Security benefits, can be taken too. It typically happens only after your loan is in default and you have received a mailed notice with a chance to dispute the debt or set up payment. An offset does not erase the loan; it just reduces the balance by the amount taken. If you are facing one, contact your loan servicer or the default-resolution office at studentaid.gov right away, because rehabilitation and consolidation can stop future offsets.
01Why it matters
Losing a tax refund you were counting on stings, and it usually means the loan has reached default. The good news is there are concrete ways out, and acting early can stop the next offset.
02The math, step by step
A borrower in default files taxes expecting a refund, but the Treasury Offset Program keeps it and applies it to the loan. After receiving the offset notice, the borrower calls the default-resolution office to start loan rehabilitation, which can prevent future offsets.
03What this is NOT
Treasury offset is NOT wage garnishment. Offset takes federal payments like your tax refund; garnishment takes a slice of your paycheck (up to 15% of disposable pay) directly from your employer. Both can result from default, but they are separate collection methods.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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