How Long Does Student Loan Tax Garnishment Take in Michigan?
If you default on your student loans, the federal government has several collections options. One option is federal and state tax refund offset — taking part or all of your tax refunds to pay back your loan. Michigan must offset your taxes if the federal government requires it to, although you can object if you believe the debt is not valid.
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Garnishment Timeline
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If a Michigan student defaults on his student loan, the federal government can take collection action against him after he is 270 days late, including garnishing his federal and state taxes. Unlike conventional lenders, student loan lenders don't have to go to court to get a garnishment order — the federal government repays the loan and then immediately takes collection action against the delinquent borrower.
Prior Notice
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The government must send you a final notice prior to offsetting your tax refunds. The notice informs you that you are in default and that your federal and Michigan tax refunds will be offset to cure the default if you don't make alternative payment arrangements. The notice usually gives you 30 days to make payment arrangements or dispute the debt before offsetting your refunds.
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Procedure
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If the federal government decides to offset your Michigan tax refunds because you are in default on your student loan, it notifies the Michigan Department of Revenue. When you submit your tax paperwork for that year, Michigan withholds the garnished amount before sending you any refund it owes you. You will get any refund owed to you as quickly as you would have if you didn't owe money on your loans.
Objections
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You can dispute the debt, either before or after a tax offset occurs. However, Michigan won't delay the offset until the objection is settled — if the federal government determines that your objection is correct and you owe less money than it thought, it will refund any portion of the tax offset that it owes to you.
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