US attaches tax refunds to collect on defaulted student loans. An upset graduate tells what happened when she didn't pay
Rita Calloway says she didn't mind when the government kept her tax refund to repay her federal student-loan debt. But she does resent the government's classifying her as a ``deadbeat'' and tarnishing her credit record. So far this year, the United States has recovered $135 million from government-loan defaulters by applying their 1985 tax refunds to their unpaid debts. An added $30 million was recovered from 50,000 defaulters who voluntarily chose to pay up rather than have their refunds attached by the Internal Revenue Service (IRS).
The results of this first-year pilot use of tax refund ``offsets'' were announced jointly last week by the Office of Management and Budget (OMB), which is overseeing government-wide implementation of credit-management reforms, and the Department of Education.
OMB Director James C. Miller III says that the ``tax-refund offset mechanism is used when all other attempts have failed. Delinquents should take the process seriously. Government loans are predicated on the same principles as a car note or a mortgage. The attitude that these are gifts is just plain wrong.''
But Ms. Calloway says the last thing she wanted was to be given anything. She says she worked her way through undergraduate school. ``I was really proud of myself. I thought I had really done something.''
But graduate school was another story. The tuition was high and she had to borrow $10,000. After graduation, she kept the $12,000-a-year part-time job that she had held during graduate school. ``It was the only job I could find, and I had these loans to pay off,'' she says.
She began paying back the loans, she says, but when the company she worked for lost its federal contract, she lost her job. She did not find work until a year and a half later. Meanwhile, she says, the government disregarded her numerous letters and phone calls, defaulted her loan, and turned it over to a collection agency.