Defaulted Student Loan

Today TaxMama hears from Margaret. “My daughter’s boyfriend, with whom she lives, filed his tax return claiming my daughter and their child for the sake of the EIC. He expected to receive approximately $2000 back as a refund. Instead he received a notice from IRS that not only was he not getting his refund, but he owed more money on a defaulted school loan from (I think) 1998.
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But is it legal for the IRS to take money in one lump like that and also put these people behind a huge 8-ball for the future?
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Isn’t there some payment arrangements that can be made to allow them to see some of the money and pay some of the money at the same time?

Dear Margaret,

Of course there’s a payment arrangement! Remember, the one your daughter’s boyfriend made with the bank that lent him the money. He blew them off.

So, you bet your sweet patooty it’s legal for the IRS to do this.

Of course, the deadbeat can still make payment arrangements. But he’ll need to contact the lender to do this.
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Once he reinstates the loan, IRS will back off until he defaults again.

But let me tell you something. IRS doesn’t take these actions until the lending agency has exhausted all attempts to collect. Once it becomes clear that these people have no intention of paying for those loans – they turn collections over to a higher power.
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Please excuse me if I don’t have a great deal of sympathy for him. In my opinion, defaulting on student loans is outright theft. They got the education. In many cases, they are making a darned good living. Not only did they steal someone else’s opportunity to get a education, but they are leaving the rest of us to foot the bill. (Remember, these student loans are generally guaranteed by the US taxpayers.)

Some measures the IRS is taking are a good idea. Our taxes would be much lower if people took responsibility for their actions. Best wishes to your daughter.

And remember, you’ll find answers to lots of student questions and other tax information, free.
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Where? At

  • Ask TaxMama :: Where taxes are fun and answers are free

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