The Trump administration has been accused of improperly seizing tax refunds from student loan borrowers by more than a dozen lawmakers.
“These seizures have already led to evictions and utility shutoffs that are harming American families,” the House Democrats, including Representatives Jamie Raskin of Maryland and Frank Pallone of New Jersey, wrote in a letter to Education Secretary Linda McMahon on September 26.
Newsweek reached out to the Department of Education for comment via email.
Why It Matters
While the federal government can collect student loan borrowers’ tax refunds, paychecks and even Social Security benefits, these garnishments were paused until April 21.
At this point, the Trump administration reversed course on the COVID-era pause of collections and said garnishments would resume, dramatically affecting many borrowers’ financial situations in the process.
What To Know
A coalition of House Democrats urged immediate action from McMahon after hearing from constituents that their tax refunds and Social Security benefits had been seized by the Department of Education without advance notice as required by law.
Under federal regulations, the department must provide at least 65 days’ notice before initiating a tax refund or benefit offset, giving borrowers time to contest or resolve the matter. Missing or outdated notices undermine this process, especially for borrowers who have experienced changes in address or family status.
“The purpose of that 60-day notice is to equip the student borrower with the necessary information to prevent the seizure of their tax refund or Social Security benefits,” the lawmakers wrote.
The latest estimates indicate that up to 10 million defaulted borrowers are at risk of tax refund or Social Security benefit offsets. According to the Education Department’s website, only a single notice may be deemed sufficient, prompting concerns that borrowers could miss critical warnings if their contact details have changed.
“By law, the Department of Education must send you a Notice of Intent to Offset before taking your tax refund to cover defaulted student loans,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek. “That notice gives you a window, usually 60 days, to dispute the debt or work something out. The accusation is that during the Trump years, some borrowers never got that notice, yet still saw their refunds taken.”
Recently, the American Federation of Teachers (AFT) has also taken legal action against the Department of Education, alleging that the administration has unlawfully delayed or denied access to loan forgiveness programs, such as IDR and PSLF.
As of late August 2025, the department reported a backlog exceeding 1 million pending IDR applications. The AFT said these delays violate statutory mandates and risk shifting the tax burden on forgiven amounts back onto borrowers if discharged after December 31, 2025, when the current federal exemption expires.
Nearly 43 million Americans hold federal student debt, and the current delinquency rate for such loans reached its highest point ever at more than 20 percent in early 2025.
“There is no reason for the Department to keep borrowers in the dark if their refunds are set to be seized,” Michele Zampini, associate vice president for federal policy & advocacy at The Institute for College Access & Success, told Newsweek. “The repayment system has been in a state of chaos for years, with borrowers receiving inaccurate and contradictory information and facing long backlogs to access affordable repayment options.”
The Trump administration’s other policy changes, including a proposed cap on certain types of federal student loans and new requirements for PSLF eligibility, have further restricted access to relief, experts say.
“The Education Department’s website says offset notices may only be sent once, which means a letter from 2019 might be the only warning you get in 2025,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek. “That’s not just bureaucratic laziness…The admin already terminated nearly half the Education Department staff in March.”
What People Are Saying
9i Capital Group CEO Kevin Thompson told Newsweek: “Even if you didn’t see a notice in your mailbox, your refund can still legally be intercepted. The government only has to send it to your last known address. So if you’re in default and expecting money back from the IRS, don’t assume it’s hitting your account. Check your loan status, confirm your refund status with the IRS, and get ahead of it before they do.”
Finance expert Michael Ryan told Newsweek: “Technically, they might be legally covered because the Education Department appears to be counting notices sent years ago as sufficient warning. Even before the pandemic…These seizures have already led to evictions and utility shutoffs. So yes, real money is disappearing from real bank accounts. Ten million borrowers are in or approaching default and at risk.”
The Institute for College Access & Success’ Michele Zampini told Newsweek: “The Department should be doing all it can to help borrowers get out of default, not going after them with little notice or guidance on how to get back in good standing on their loans. Borrowers need clear, updated, and actionable information about how to protect themselves from garnishments, and it’s the Department’s responsibility—and, ultimately, in the Department’s own interest—to provide these to them.”
What Happens Next
Financial experts said borrowers in default should assume their refund is already gone.
“Don’t wait for a letter that may never come,” Ryan said. “If you’re in default, contact your loan servicer immediately and explore rehabilitation options. Your tax refund is the government’s leverage, not your emergency fund.”