How to Pay Down Student Debt With Tax Refunds

Whether your tax refund is a few hundred dollars or a few thousand, it can make a large dent in your student loan debt, decreasing your monthly payments and the amount you pay in interest. For this reason, using your tax refund to pay down your student loan debt can be a smart financial decision. However, the U.S. Department of Education can also seize your entire refund if you are behind on any federal student loan payments.

Instructions

Paying off Loans Not in Default

1

Deduct the maximum amount for your student loan interest. The IRS allows most borrowers to deduct $2,500 or the total amount you paid in student loan interest, whichever is less. Deductions allow you to decrease your tax liability, which means a bigger refund to use for repaying your student loans.

2

Maximize your refund. Start preparing your taxes early so you have time to locate bills and paperwork and review your taxes. Consult with a professional tax preparer to ensure you are not missing any credits or deductions. Ask the preparer about new state programs and lifestyle changes, such as having a new baby or getting married, that could affect your taxes.

3

Examine each of your student loans to find which has the highest interest rate, and decide to apply your refund to this loan. This will save you money in the long run, as you will pay less money in interest.

4

Call the loan company to confirm the amount owed. Ask the company to provide you with a "payoff amount" if you think you will be able to pay off your loan in its entirety. The entire amount you actually owe on a student loan debt is slightly more than what is on the statement, as more interest accrues each day. By getting a payoff amount, you'll know exactly how much you need to pay. Otherwise, you could have a few cents or dollars still accruing interest and late payment fees adding up while you think the debt is gone. When you get your refund, pay off the loan, or pay as much as you can on this loan.

Paying Off Loans in Default

5

Call the loan or collection company and attempt to work out a settlement. According to Fastweb.com and FinAid.com publisher Mark Kantrowitz, you can ask the company to reduce the either the entire amount or the unpaid interest. Know what your tax refund will be, and try to get a settlement amount close to your refund. Ask the company to send you a written notice of the settlement agreement, and review it with a lawyer before you pay.

6

Ask the company to waive the collection charges. If the loan has gone into default but you have settled for an amount that will be paid in one large sum when you get your tax refund, the collection company may waive the collection charges, Kantrowitz told the "New York Times." This means you will get to save more of your refund, or have less to pay above and beyond the refund. Once you have reached a settlement or a waiver of collection fees that both you and your lawyer think seems fair, pay the loan using your tax refund.

7

Allow the Department of Education to seize your tax refund if a settlement cannot be reached on you federal loans. If you are unable to work out a settlement following the process in Step One, you may have no choice other than to allow the Department of Education to take your tax refund. However, the government must notify you and give you a chance to make a payment arrangement before they take your tax refund. If you have a private student loan in default, the government cannot seize your tax refund, but you will likely suffer a large reduction in your credit score, and you may be sued.

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California Debt Laws

If you default on a debt, your original creditor may sell your account to a debt collection agency. Debt collection agencies contact debtors to attempt to collect the debt. Federal and state laws prohibit debt collectors from using unsavory tactics when speaking with debtors. California law works along with federal laws to give debtors in California protection from unfair debt collection practices.

Harassment Laws

Federal laws prohibit debt collectors in any state, including California, from harassing debtors. For example, debt collectors cannot call debtors at unreasonable hours or make threats that they cannot carry out, such as threatening to arrest the debtor if he does not pay his debts. Debt collectors may contact debtors at work unless the debtor specifically requests that they not do so. California law specifically forbids debt collectors from using obscene or profane language when talking with debtors.

Disclosures

A creditor does not have to disclose to a debtor that it is selling an account to a collection agency. Within five business days of first contacting a debtor, however, California debt collectors must disclose information to the debtor regarding his debt. The debt collector must provide the debtor with the name of the original creditor, the exact amount of the debt he owes, and what steps the debtor must take if he wishes to dispute the validity of the debt.

Contacting Others

Debt collectors in California may contact your friends and relatives to attempt to locate you. However, they may not discuss any details of your financial situation with these people. California debt collectors may contact your employer to verify that you are employed or verify your employment address or to set up wage garnishment following a court order. If the debtor owes money to a hospital or doctor's office, the debt collector may also ask employers if the debtor has health insurance through the company.

Cutting Off Contact

California debtors have the right to demand that a debt collection agency cease contacting them regarding specific debts. The debtor must make her wishes known in writing. She can demand that the collection agency stop contacting her at work or cut off contact altogether. Collection agencies may contact the debtor one final time after receiving such a request but then must cease communication Debt Help.com reports that collection agencies are more likely to file lawsuits against debtors if they cannot contact the debtor to resolve the debt out of court.

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Can I Sell My Car to My Husband Before I File Bankruptcy?

Selling your car to your husband before filing for bankruptcy is allowed if the car is sold at fair market value. The rule is necessary to keep people from transferring ownership of valuable assets they could lose in bankruptcy. The bankruptcy court will review transactions dating back two years if it suspects you have been giving away or selling assets at below market rates while preparing to file for bankruptcy.

Fraud

Felony bankruptcy fraud charges are possible for widespread transferring of assets, although selling a car to your husband is unlikely to result in a charge. The bankruptcy court is serious about maintaining the integrity of the process, and it can file a lawsuit to void the sale of the car to your husband if the car was sold below market value.

341 Meeting

Bankruptcy trustees review your list of debts and assets during a conference called the 341 meeting, which is also known as a meeting of the creditors. Creditors listed in your bankruptcy are allowed to attend to ask questions about your debts and assets. The trustee leads the discussion and tape records your answers. Inconsistencies in your statements about assets could trigger an investigation by the trustee.

Legal Advice

You may file for bankruptcy with or without an attorney. Experienced, reputable attorneys are valuable, because they help avoid mistakes. A good attorney will thoroughly question you about your assets and review rules against transferring assets.

Exemptions

The attorney can also advise you about exemptions that allow consumers to keep many assets in bankruptcy, including automobiles. Contact several bankruptcy attorneys before filing if you have concerns. Initial consultations are usually free, and interviewing two or three attorneys allows you to ask many questions.

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Do I Pay Debt Sold to a Collection Agency?

Once your original creditor sells your unpaid account balance to a collection agency, you no longer owe the debt to the original creditor, but to the company that purchased your account. Whether or not to pay a collection agency is a personal decision, but doing so carries its own set of advantages and disadvantages, depending on your circumstances.

Lawsuit Risk

The risk of a lawsuit is a factor you must consider when deciding whether to pay off a collection account. Although collection agencies threaten lawsuits much more frequently than they file them, each debt collector conducts business differently. Your lawsuit risk increases the more you owe. In general, however, consumers are most likely to face collection lawsuits for debts that exceed $1,000. Should a collection agency file a lawsuit against you for your unpaid debt, you could face wage and bank account garnishment in addition to liens against your real estate and personal property.

Credit Reporting

Contrary to popular belief, paying a collection agency neither erases the collection account from your credit report nor raises your credit score. When you pay off the debt, the company will, however, update your credit file to reflect that the debt was paid. Paid debts always look better to anyone reviewing your credit report than unpaid accounts. Collection accounts do not remain a part of your credit history indefinitely. Regardless of whether your financial circumstances permit you to pay off your debt or not, the Fair Credit Reporting Act requires that the credit bureaus remove collection accounts after seven years.

Age of Debt

When pursuing debtors through the court system, every collection agency is bound by the statute of limitations for debt collection in the individual's state of residence. Each state differs, but most states' statutes of limitation fall somewhere between three and six years. After this time period, a debt collector cannot legally sue you for your debt. Making a partial payment on the debt resets the statute of limitations -- leaving you once again vulnerable to a lawsuit. Thus, if the statute of limitations in your state has already passed, paying in full is a less risky option than submitting a partial payment.

Collection Activity

Although the Fair Debt Collection Practices Act provides you with the right to force a collection agency to stop contacting you by sending your request to the company in writing, this cease communication order does not apply to any other collection agencies that purchase your debt in the future. As your debt is sold or transferred from debt collector to debt collector, you will continue to receive telephone calls and letters concerning the unpaid balance. Paying the debt in full, however, stops any further collection activity. By paying off the account, you satisfy your obligation to the debt and prevent the collection process from proceeding any further -- preventing any future collection activity.

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How to File Unemployment Tax in Washington State

If you have worked in the state of Washington in the previous 18 months before losing your job, you may be eligible to file for unemployment tax benefits. In order to qualify for unemployment compensation in Washington, you cannot have lost your job through any fault of your own. Additionally, you must have worked a minimum of 680 hours in the previous 18 months. If you meet those requirements, you can apply for unemployment benefits through the Washington Employment Security Department.

Instructions

1

Collect your employment history, including addresses and phone numbers, for all of the jobs you have had in the previous 18 months. You also need your Washington state driver's license number and the amount of money you made at each employer.

2

Apply online using the benefits application on the Washington Employment Security Department website (see Resources). If you have worked in a state other than Washington in the past 18 months, you cannot do the online application, but must apply over the phone.

3

Call the benefits center at 800-318-6022 to apply for unemployment benefits over the phone.

4

Wait for your unemployment handbook and award letter to arrive in the mail after you apply. Usually these will show up within 10 business days, unless your application is undergoing further processing.

5

Claim your weekly benefits either online or over the phone for each week that you remain unemployed. To stay eligible, you must be willing and able to work and actively seeking employment while getting unemployment benefits.

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What Is the Meaning of a Written Off Account in Collections?

If you are trying to buy a home or a car or just trying to extend a line of credit, your credit report will be pulled and scrutinized. Knowing what is on your credit report is important but understanding how this information relates to your credit score is key. An account in collections can mean trouble, but is it better or worse for the account to be written off?

Definition

A write-off is the process by which a company changes the value of an asset from a positive to a negative. In most cases, the company will eliminate the asset altogether showing it as a loss. A write-off takes place after six months of non-payment on a credit card. The company sends the account to a third party collection agency who will try to collect as much of the debt as possible.

Write-off vs. Charge-off

A write-off is similar to a charge-off. The main difference is that a charge-off is usually a loan that can't be collected. A write-off is often real property, such as a building, vehicle, or home that has lost its value.

Positives of Write-Off

Though a write-off can be bad for your credit score, there are some positives. When a company chooses to write off a debt, they will usually stop charging high interest, late fees and over the limit fees. Once an account reaches a collection agency, this may include the opportunity to settle the debt at a lower cost.

Negatives of a Write-Off

A written off account in collections takes a toll on your credit score because the debt is normally listed twice, once for the original creditor and the second time by the collection agency. A write-off does not normally release a consumer from his responsibility to the debt.

Avoiding a Write-off

If it seems impossible to keep up with the agreed upon payment arrangement, contact the lender as soon as possible before a write-off takes place. Request an easier payment schedule, often the lender prefers to lengthen the loan than have to write it off.

Improving Your Credit Score

When calculating your credit score, the most heavily weighed information comes from the original lender and not the collection agency. If at all possible mend the issue for the full amount with the lender first, this will improve your credit score when the account balance it reset to zero. If the account balance with the original lender reflects as zero owed on your credit report then your score can no longer be improved by that lender. In this case, going to the collections agency and paying off the debt will not help your credit score.

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How to Write an Unfair Finance Charge Letter

The unpleasant shock of reading a credit card statement, only to discover that improper charges have been applied, can be a frustrating experience. While a simple call may resolve the issue, consumers often find that the representative on the line does not have the authority to handle the complaint. If getting to someone who can help seems hopeless, putting the problem down in writing to the correct individual or department is essential -- not only to document your side of the issue if it escalates, but to obtain the favorable response you seek.

Instructions

1

Verify the correct address to which the letter needs to go. Many companies have one address for bill paying, and another for correspondence. If the letter is sent to the wrong address, it may not be forwarded to someone in authority to handle the matter; or worse, it may be tossed with the envelope in error. If you have not received any assistance through normal correspondence channels, move on to the company's corporate office, addressing the letter to the CEO, if possible.

2

Write a rough draft of the letter, outlining what occurred to cause the improper finance charge and why you feel it is unfair. Point out the terms and conditions of your credit agreement with the company, and how the finance charge is in violation of this agreement, if applicable. If the charge is allowable under the terms, but you still feel it was an improper assessment, explain this thoroughly but succinctly. Mention by name anyone you spoke to who would not help you with the issue over the phone. Describe what you want the credit card company to do to correct the problem; for example, remove the charge or credit your account in some way.

3

Read over the rough draft, correcting any spelling errors and run-on sentences. Make sure that the letter clearly states the problem and the remedy requested, as well as what agencies you intend to contact for complaint -- such as the Federal Trade Commission or Attorney General of your state -- if the credit card company is not willing to resolve this matter.

4

Include any contact information you want the credit card company to use in trying to reach you to resolve the matter; this should include your mailing address and phone number, as well as an email address, if you use this for business matters.

5

Provide copies of any documentation that supports your side of the argument. This can include a purchase receipt; a copy of your most recent billing showing the disputed finance charge; notes taken during phone conversations with the company; or a copy of the company's credit agreement with the applicable portions highlighted.

6

Mail the letter with a verification that it was received, using certified or registered mail. If you only wish to show proof that the complaint letter was mailed to the credit card company -- helpful in the event the company later claims nothing was received -- you can obtain a Certificate of Mailing for a minimal cost.

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