It has been one month since tax season came to an end. By now, many student loan borrowers have learned the hard way that the federal government will take their tax refund, including Earned Income Tax Credits (EITC), if they are in default on a federal loan. A couple of months ago, we shared a blog post warning people about this collection tactic. We asked people who had this happen to them to share their stories and to tell us what they planned to do with their tax credit.
The stories were heartbreaking and show the devastating impact of taking these funds from low-income working families. Here are some excerpts from the stories:
- I was planning on using my EITC to get dental work for me and my children.
- I am a single mother of 4 small children and had undergone major emergency life threatening surgery and medical issues and have been unable to work since July 2015, I needed that money to keep a roof over our heads and to pay back utilities landlord etc.
- I planned to get an apartment, a car, pay bills and take care of what was important. I work only weekends and have no other income or help. I work at a rate of 8.50 & can’t afford daycare to even get more hours.
We received more stories than we could respond to, but we read all of them and they moved us to take further action. Today, the National Consumer Law Center released a policy brief calling on the U.S. Departments of Education and Treasury and the White House to work together to end this terrible practice.
The EITC is incredibly important to working families and is effective not only in alleviating existing poverty, but also in lifting future generations out of poverty. Seizing EITC payments is a counterproductive policy which compounds the harms borne by low-income borrowers, who in many cases were denied the promised benefits of education, and injures borrowers’ children in meaningful and potentially long-lasting ways. In light of the EITC’s intended purpose of helping to lift working families out of poverty and the harms caused by the seizure of borrowers’ EITC payments, this practice must stop.
Has this happened to you? How were you planning on using your EITC refund? Share your story to help us put an end to this practice.