By: Calvin O’Neal Russell Jr – Certified FICO Professional
I remember it like it was yesterday. I walked inside of the tax place and the lady was very professional. She explained to me how taxes worked and how people always ended up getting refunds. Of course, I asked how can I get one. She told me not to worry as I was getting back less than $2000! Yeah, I was excited as well!
About a few weeks later, after I had already spent the money mentally and emotionally, I received a letter in the mail explaining to me that the student loan mafia had taken 100% of my tax refund. Of course, I was pissed off and told myself that would never happen again.
Let me show you how to keep it from happening to you or someone you know.
1. Why Does Your Tax Refund Get Taken By The Student Loan Mafia
Your tax refund will get taken if your student loans are in a default status for a certain period of time. Assuming that you have been receiving phone calls, emails, and letters in the mail about your current loan situation, most people ignore them and end up getting their refund garnished.
[bctt tweet=”Your tax refund will get taken if your student loans are in a default status.”]
2. Call Sallie Mae or Your Student Loan Collector
This is probably one of the hardest calls to make as you have either been dodging their incoming calls to you or dreading calling them back at all. Calling them will let you know what your options are for repayment and some collectors offer payments as low as $5/month. All you have to do is simply take your loans out of default status. Some collectors will have you pay the past due amount and some collectors simply want you to schedule payments or deferment.
3. When Should You Call Them
Immediately! If you can set up a payment plan, deferment, or at least pay the past due amount BEFORE YOU FILL YOUR TAXES, most collectors won’t take your tax refund at all. Of course, that would be the first question to ask before you think you have a clear way out of it and there may not be a way out….at least for this year.
4. The Positive Side Of Your Garnishment
I know some of you all are reading this like, “How can this be positive?” Well, lets think about it. Lets say that you owe $20K in student loans and you get a tax garnishment of $2000. If you have not paid your student loans at all, at least they have $2000 from you which is the same as $167/month. Now, I am not saying that you should let your taxes get garnished in any way, but it does make sense to simply use a good portion of your refund towards your student loans as they are growing in interest daily.
5. What Happens To Your Credit Report & Score
If you have been dodging Sallie Mae, USDOE, Federal Student Loans, Navient, Nelnet, or etc, your credit score is more than likely decreasing as I type this post. The reason why your score decreases is simply because the student loan collectors report your payments late each and every month that you are in default or at least 30 days behind on payments. Remember, 35% of your credit score comes from payment history. So if your student loan payments show up as late payments every month, your credit score will possibly drop to the low 500’s or high 400’s. Even if everything else on your credit report had positive activity, your score would only go so high because the late payments from the student loans every month would put a cap on your credit score improvement.
The Bottom Line
Now you know how to keep the student loan mafia from taking your tax refund! Hopefully this information was helpful and worth every minute! Please be sure to share this article with people you think would benefit from it.