Democratic lawmakers are sounding the alarm on a move by the Trump administration they say has resulted in the government “improperly” seizing the tax refunds of defaulted student loan borrowers.
Twenty-three Democratic members of Congress signed a letter addressed to Education Secretary Linda McMahon on Sept. 26, stating the government had failed to provide the required notice to borrowers.
“These seizures have already led to evictions and utility shutoffs that are harming American families,” the Democrats wrote in the letter.
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The lawmakers say the Education Department is required to give borrowers 60 days’ notice before their tax refunds or Social Security benefits are seized.
Why is this happening?
The Education Department’s (ED) Federal Student Aid (FSA) website states that before an offset begins, “a notice of intent to offset will be sent to your last-known address to inform you that the offset and negative credit reporting are scheduled to begin in 65 days.” It also states “the notice may only be sent once.”
But in the letter, Democrats say they’ve received reports from borrowers who have suddenly had their tax refunds offset. It appears, they say, the Trump administration is assuming an offset notice sent years ago, such as before the pandemic-era freeze on collections, is sufficient enough to begin collection activity.
Payments on defaulted student loans had been paused since March 2020. The federal government resumed collections on defaulted student loans in May.
As of June 2025, the DE reported more than six million student loan borrowers were delinquent and approximately 5.3 million were in default. The Democrats’ letter stated approximately 10 million student borrowers were already, or soon could be, in default.
Is there anything I can do if my tax return has been seized?
According to the National Consumer Law Center (NCLC), if your tax refund was seized and you did not receive a letter warning you about the offset, you should call the Treasury Offset Program at 1-800-304-3107. (1) You can also call the Treasury Offset Program if you want to see if you are on the list to have your refund seized.
If you received an offset letter and you want to try to stop your tax return from being seized, you can establish a repayment agreement (including loan rehabilitation or consolidation), pay the debt in full or request a review, objecting to the collection. The FSA website notes examples of objections, such as “you may argue that you don’t owe the debt, you aren’t behind on payments, you’re currently in bankruptcy or are totally and permanently disabled.”
The NCLC says that financial hardship can be argued as an objection, but that “you usually have to be facing a significant and urgent hardship, such as an eviction, foreclosure or utility shutoff, in order to stop the offset.”
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When it comes to the seizure of Social Security or other government benefits, while the ED announced it would not seize Social Security benefits right now, this could change at any time. As with tax refund offsets, the government can take part of your Social Security benefits to apply to your defaulted student loan. The government can take up to 15% of your benefits, so long as the remainder is at least $750.
Another collection power the federal government has is administrative wage garnishment. This is when your loan holder instructs your employer to withhold up to 15% of your wages, to be applied to your student debt.
You can request a review if you are notified that your benefits will be subject to an offset, or request a hearing if your wages will be subject to administrative garnishment, in processes similar to that for a tax refund offset review. Or agree to a loan repayment plan.
Further details on the collection of defaulted student loans and borrowers’ options can be found on the FSA website.
What to do if you are at risk
It’s unclear if the ED will make changes in response to the letter. Education expert Mark Kantrowitz noted to CNBC that while the law may be on the agency’s side, “there is no precedent where there was a delay of several years between the time the U.S. Department of Education issued a notice of intent to offset and when the offset occurred.” (2)
The Democrats’ letter noted that “many borrowers have likely gotten married; moved across state lines; become parents of dependent children or have suffered drastic misfortunes that aren’t reflected in their individual profiles with the now-gutted FSA.”
The letter also questioned the accuracy of the Education Department’s latest data on borrowers’ “true outstanding balance” and contact and employment information.
Contact your loan servicer as soon as possible if you think any of these scenarios may apply to you. Check your profile to make sure your contact information is updated with the ED and your loan servicer.
If you are struggling to make payments on your student loan in general, contact your loan servicer. There may be options that can help you, such as an income-driven repayment (IDR) plan. IDR plans limit monthly payments based on a borrower’s income and family size rather than the loan amount.
You can also apply for a deferment or forbearance to temporarily pause or reduce payments. The downsides of these options include the fact that interest may still accrue, and that those pauses can affect your progress toward loan forgiveness.
Certain borrowers may qualify for loan forgiveness programs. Some people who can qualify include teachers, medical professionals, government employees, people with disabilities and people who have been on the Income-Based Repayment Plan (a type of IDR plan) for 20 or 25 years.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
National Consumer Law Center (1); CNBC (2)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.