Will taxes be offset if in loan rehabilitation?

Answer 1

Unfortunately the answer is probably yes. If you were already on the tax offset list from your loans being in default prior to starting the rehab program, then you will not come off the tax offset list while in rehab. You will only go off the tax offset list once your defaulted loans are in a "regular" status.

If you have not filed your tax return yet for this year, there still may be help for getting your tax return and getting out of default in 30-60 days.

Here is some useful information about defaulted loans:

There are only 2 ways to get out of default on your Federally Guaranteed student loans.

1. Contact your collection company or student loan servicer and request to enter the rehabilitation program. Most people qualify, but I have seen some refused when the default is over 10 years old. In the rehabilitation program, you will need to make 9-12 on-time payments in addition to your garnishment. After the 9-12 on-time payments, they should stop the garnishment, but you will stay in a default status until your Rehabed loans are sold to a new lender. In the past, that was an easy process, but in these turbulent financial times, other lenders are not buying rehabed loans. So, with this option your loans will stay in a Default status for the forseeable future.
2. The second way you can get out of default and have your garnishment lifted is to consolidate your loans. These days very few Federal lenders will consolidate defaulted loans and your lender will probably not release the loan for consolidation while in a garnishment stage. The good news is, there are a few companies out there that will help you get a garnishment lifted and find a Federal lender to consolidate the loans.