Home |IRS Tax Return | Could the newly initiated student loan repayment plan potentially result in the offsetting of my tax refunds for 2023, even though my income is close to the poverty line, and I may qualify for the Earned Income Tax Credit (EIC)?

Could the newly initiated student loan repayment plan potentially result in the offsetting of my tax refunds for 2023, even though my income is close to the poverty line, and I may qualify for the Earned Income Tax Credit (EIC)?

Robert James, 20+ years of experience in IRS matters
Answered on September 24,2023

If your student loans are in default, yes they will take your refunds.

The best thing you can do is try to get your refund as close to zero as possible. I know that's not usually an option for people with a lot of refundable tax credits, but you can use the Tax Withholding Estimator to try:

Tax Withholding Estimator

Many years ago I had student loans in default and lost some my refunds. I eventually was able to get the loans rehabilitated by paying $50 a month; I don't know what the current options are, but look into that. You only get one chance to rehabilitate a defaulted loan, so make sure you can afford the monthly payments.

Getting out of default

When you are due a refund from IRS you have three years after the due date to still file and get the refund. So if you are working on rehabilitating your loan next year, you can wait to file your 2023 tax return as long as you don't need the return for any other reason (like you are trying to buy a house). The free tax preparation programs can help you file in a later tax season.

Free Tax Return Preparation for Qualifying Taxpayers

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