Get Out of Debt Guy

I Paid Off My Student Loan But My Tax Refund Was Captured

Posted March 14


Dear Steve,

Back in 2011, I paid off my student loan in full for $10,152. I had purchased a money order at United States Post Office. I received a settlement of close to $100,000 at that time in March 2011. I wanted to pay off my loan so I wouldn’t have to think about it again. Now forward 5 years, and my tax refund of $2089 (federal) is being garnished for my student loan.

I have attempted to file disputed with the credit reporting agencies, to contacting all these creditors (Nelnet, ACS, ACT) & US Dept of Education’ all who apparently held my loan but didn’t according to them. The creditor I paid in full were Direct Loans. They are no longer in business.

The address the companies had listed on my report has not been my residence for 5 years. I had paid off my student loan in May 2011. I even called to verify they received payment to which they responded that they did. Additionally, I have proof of funds from the account it would have came from but I cannot locate a copy of my money order receipt. Additionally, the company I made payment to, Direct Loans, is no longer in business.

I’ve attempted to contact the reporting agencies, to all these loan servicers who apparently had my loan but never really should have. How can I fight this and remove this debt responsibility from my name? It is tearing my credit and character for future employment opportunities. I feel like I have been robbed and victimized so bad for doing the right thing. Thanks you for your help.



Dear David,

Well the first thing you need here is some clear information from which to make some good choices about how to move forward. The best source of information about your loans would be the National Student Loan Data System for Students (NSLDS).

I would urge you to login and check the current reporting of your federal student loans.

Because your loan or loans are now in a tax intercept status it is clear you have a loan in default. You are going to have to track down which federal one through NSDLS.

You mentioned Direct Loans, which is also known as the William D. Ford Federal Direct Loan Program. It is very alive and can be found at

Unfortunately without some documentation showing your account was paid in full or proof the money order was cashed, you are going to have to work out the discrepancy with the servicer of the loan which is almost certainly being reported in default.

But moving forward, until this issue is resolved, there is an incredibly easy way to avoid a tax refund intercept. Click here to find out how.

The fact the companies are reporting an address where you have not lived for years is indicative that either you have not had a relationship with those companies on a open account or you had an open account but moved a couple of times since then and your address was not updated.

If your tax refund was intercepted and you had no notice of collection activity then it leads me to certainly assume the potential loan is held by a servicer who does not or has not hunted you down. Your current address is not a requirement to intercept your tax refund.

So I would suggest you take a couple of immediate steps. First, login to NSDLS and find out what is being reported about your previous federal student loan(s). Second, I would make sure your credit reports have your current address so communication issues like this might be avoid by allowing you to be located before escalation to a wage garnishment or you being sued. Finally, I would use the information from NSDLS to identify who is servicing the potentially problem loan and provide them with proof of your final payment on the loan you believe might be causing the issue.

This article by Steve Rhode first appeared on Get Out of Debt Guy.


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About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.