Show Gotcha IRS Applies Tax Return Toward Defaulted zari tw v I J J Student St U d en t Loans h by Ernie Geddes Staff Writer Last year the IRS surprised over thousand taxpayers when the agency took their tax refund checks to pay their defaulted defaulted defaulted de de- de- de faulted student loans Gail Norman director of financial financial financial finan finan- cial aid at said nationally almost almost al almost al- al most l 11 l of all student loan recipients recipients recipients default or refuse to repay their loan reported an 11 l 1 default default default de de- de- de fault rate last July Our highest was 18 one year but it has been much lower ever since Norman said Norman said defaulted loans are no most cases the student has been offered some alternative payment plans and has not accepted those in other words there is a total lack of co Norman said a alot alot alot lot of defaulted loans come from students who took out loans left school and disappeared Federal student loans are funded by a financial institution and guaranteed by the govern govern- ment When a student defaults on a loan the federal government government government govern govern- ment which guaranteed the loan must pay for the loan with tax dollars and then try to collect money from the student By keeping taxpayers' taxpayers tax re returns returns returns re- re turns to pay for their defaulted loans the government hopes to regain lost money the taking of the tax refunds is not really that new Norman said the state of Utah has been doing it for a number number number num num- ber of years Norman said Utah's Gotcha program has been withholding state tax returns from those with defaulted student loans for years The state loan Joan guarantee agency matches funds with the state tax office to pay payoff off bad loan Joan debt Norman advises students to think before they borrow and dont don't default It is frightening to see the amount of loan debt some of our students are piling up Its It's because because because be be- cause all you have to do is ask for forit forit forit it and have some unmet educational educational educational need Norman said Noman said she fears for students students students stu stu- dents who have excessive loan debt because they may not be able to meet payments When I look at students who leave here in debt 14 14 or 15 thousand and what they're paid is not going to be enough to let them live and make their loan payments Norman said Defaulting on a student loan has serious consequences Not only can the federal and state governments take tax refunds but they can garnish wages and certain other types of income The government has its own collection agencies and the loan is turned back to the federal government only after the state guarantee agency has tried to collect Norman said And when you consider the re resources resources resources re- re sources of the federal government government government govern govern- ment and all the ways they can skip trace people Default t is also reported to all credit credi t bureaus Students who default on student loans will have trouble getting car and home loans Starting next year 45 J colleges colleges colleges col col- col- col leges and secondary post-secondary schools across tl a country will participate participate participate pate in the direct lending pro pro- gram Continued on page 2 Defaulted Loans Continued from page one Instead of loan money coming from a local lending institution the money will come directly from the United States Treasury The federal government will own and administrate the loan Norman said that direct lending will not have a significant effect on students In the case of direct loans the money is going to be coming from the US U.S. Treasury From the student standpoint there will be very little difference difference dif dif- dif dif- ference Norman said We have signed up for about 20 of the loans we will be awarding for forthe forthe forthe the next year Norman said We will willbe willbe willbe be giving those loans to first time borrowers borrowers borrowers bor bor- rowers only Norman said they will limit direct loans to first time buyers because because because be be- cause there is currently no way to consolidate loan debt with a direct loan If a student who now has loans cannot consolidate it would force that student to pay two separate loan payments The doesn't want to put students in that position Now in its third year direct lending lending lending lend lend- ing will bypass the lenders 41 guaranty agencies and 90 secondary markets that now make the current loan program Drawbacks of the program include no way to consolidate current loans and the fact that the local lending in institutions institutions institutions in- in stand to lose a substantial amount of student loan business |