Student Loan Payment Question: Will My Taxes Be Taken?

The cost of tuition at the country's private universities is increasing by 5 to 8 percent each year. Public universities have the same problem: At some state universities' flagship campuses, tuition has more than doubled since 1990. The cost of so-called "room and board" has risen in similar fashion as well. The vast majority of American college students now require some form of financial support to cover their higher education expenses.

It's true that some especially promising students are able to pay their way through school using "merit-based" grants that cover their education costs in the hopes that they'll pursue post-graduate academic careers. Meanwhile, the cost of tuition can be waived entirely for student athletes at institutions that belong to the Division I and Division II athletic conferences.

It's important to remember that neither of these situations is especially common. In the majority of cases, students receive financial aid in the form of state, federal or private loans that must be repaid after graduation. If you attended college within the past two decades, it's likely that you have at least one student loan to your name.

If these loans are adversely affecting your financial health and hampering your ability to provide for your family, you might be thinking about taking drastic measures to get your finances in order. Before you choose to stop making payments on your student loans, think about the consequences of this course of action.

While they're not technically "secured" by a tangible asset like a piece of real property or a motor vehicle, student loans can't be discharged in bankruptcy. Federal law permits student lenders to recoup their losses on delinquent loans using a variety of harsh tactics. If you owe significant balances on your outstanding student loans, you may have to field angry calls from your lenders' collection-agency partners or respond to threatening letters or e-mails on a daily basis.

You may also have to deal with wage and tax-refund garnishments. Unfortunately, these activities are perfectly legal. If you're seriously delinquent on your student loans and your lender determines that you'll be unable to repay your current balances in a timely fashion, your tax refunds may be seized on an annual basis. This may continue until your debts have been satisfied or until a judge demands that the seizures cease. You may be able to secure a temporary reprieve from these collection activities by declaring bankruptcy.

More On This Topic


Comments are closed.