Owing back taxes to the IRS is a huge financial burden because you need to make regular payments or have your paychecks garnished. Paying for higher education while you owe back taxes can be nearly impossible for some people. Thankfully, students who owe back taxes to the IRS are still eligible for financial aid.
Federal Aid Eligibility
Owing back taxes to the IRS will not affect your eligibility for federal student aid. The U.S. Department of Education does not consider many debt-related factors in your eligibility for aid. The only disqualifying debt would be if you owed a refund on a federal grant or were in default on a federal student loan.
Applying for Aid
Like all other people trying to receive financial aid, you must fill out the Free Application for Federal Student Aid (FAFSA) to find out what aid you will actually receive. Federal aid is distributed based on the difference between what your family can afford to spend on college each year and how much the college costs. If the difference is large, you may receive grants. Otherwise, you will probably only get a work-study job or student loans.
Private Student Loans
When you do not receive enough financial aid through the federal government, state agencies and your school, one option is to get a student loan from a private lender. In this situation, owing back taxes could hurt your chances of qualifying. This is because private lenders consider your credit score when determining whether to issue a loan. An unpaid tax lien will damage your credit, so unless you have otherwise stellar credit, you will probably not qualify on your own. If you get a creditworthy cosigner to apply with you, you may be able to qualify.
Considerations
When you apply for financial aid, the FAFSA does not consider your back tax payments when determining your income available for college. Therefore, your estimated family contribution may be far higher than you can afford. If you do not get enough financial aid, appeal the decision with your school and ask for a professional judgment review based on your excessive tax bills. If that does not help, you will need to get another job or take out additional student loans to make up the difference.
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