Get Out of Debt Guy

My Tax Refund Was Taken Because of My Student Loans

Posted April 30, 2014

WRAL Reader Question

Dear Steve,

My student loan is now in garnishment and of course my tax return was withheld. My wife is a student right now because she also has student loans that we cannot afford to pay back at this time so we keep deferring them. we have other credit card debts as well. We rent because our credit is shot and still just trying to keep our heads above water.

What are our options and whats our best option. Digging out of this hole seems impossible. I would rather be fighting over seas again.


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Dear Chad,

First off, thank you for your military service.

The good news is it sounds as if these are federal loans. In that case you have some very good options to deal with this. 

People often make two critical mistakes in these situations. The first is not adjusting their withholdings to reduce any tax refund they may get. This puts more money in your pocket each month and prevents big refund checks from being intercepted since there would be no more big refund checks. That's an easy first step you can make today.

Secondly, because these are federal loans you are eligible for an Income Based Repayment (IBR) program. The IBR will give you a payment based on your income. Payments are as low as zero dollars per month.

Deferring loans is financial suicide. It only grows the balance and pushes the problem out into the future. The IBR program is a sound and logical solution to pursue and it will get you current.

But before you leap at anything, read my free guide on how to deal with student loans you can't afford. That guide will give you a step-by-step plan on what to do.

I'm sure you feel your current situation is hopeless. But the reality is you have some great options to change this up and make it better.

Steve Rhode
WRAL 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.