Treasury Department Referred My EIDL Loan: What Does This Mean?
So you’ve been struggling to make your EIDL loan payments, and you knew you were behind, but you werent sure exactly what would happen next. Then you received a letter—maybe from the SBA, maybe from the Department of Treasury’s Bureau of the Fiscal Service—informing you that your EIDL loan has been “referred to the Treasury Department for collection” or “transferred to Treasury’s Cross-Servicing Program.” Your heart sank when you read it, because it sounds serious and official and threatening, but your not entirely sure what it actually means. Does this mean the SBA gave up on collecting and sold your debt to some aggressive collection agency? Does it mean your wages are about to be garnished? Does it mean the federal government is going to seize your bank account? Can you still work out a payment arrangement, or is it too late now that Treasury is involved? The terminology is confusing, the consequences are serious, and honestly your probably panicking right now trying to figure out what this means for you.
Here’s what you need to know, and its NOT good: **When your EIDL loan is referred to the Treasury Department, it means the SBA has transferred your delinquent debt to the Department of Treasury’s Bureau of the Fiscal Service for more aggressive collection**. This typically happens after your loan has been delinquent for approximately 180 days (about 6 months of missed payments), though the SBA has changed its policies and now refers some loans earlier and refers smaller loans that previously werent referred at all. Once your loan is transferred to Treasury, several serious things happen—and I mean SERIOUS. A 30% penalty is added to your outstanding balance overnight (so a $100,000 debt becomes $130,000 just like that), the debt is reported to consumer credit bureaus (destroying your credit score if it hasnt been reported already), and Treasury begins using there extensive collection tools including offsetting your federal tax refunds, garnishing your wages if you signed a personal guarantee, and potentially pursuing liens on your property. The SBA no longer services your loan after the transfer—you cant contact the SBA to arrange payment plans or accommodations anymore, because Treasury now owns the collection process and they dont mess around.
This article explains what it means when an EIDL loan is referred to Treasury, when and why these referrals happen, the two Treasury programs your loan might be referred to (the Treasury Offset Program and Cross-Servicing Program), what consequences you’ll face after referral, how the 30% penalty works, what collection actions Treasury can take, whether you can get your loan transferred back to the SBA, and what options you have after your loan has been referred. If you’ve received a Treasury referral notice or your worried your loan might be referred soon, understanding the process and your rights is essential to protecting yourself and exploring whatever options remain.
What Does It Mean When My EIDL Loan Is Referred to Treasury?
When the SBA refers your EIDL loan to the Treasury Department, it means the SBA has determined that standard servicing and collection efforts aren’t working, and they’re escalating collection by transferring the debt to the Department of Treasury’s Bureau of the Fiscal Service—the federal government’s central debt collection agency. The Bureau of the Fiscal Service has broader and more aggressive collection tools than the SBA uses during normal loan servicing, and their job is to maximize collection of delinquent federal debts using all available legal means.
The referral is not a sale of your debt to a private collection agency—your debt is still owed to the federal government (ultimately to the SBA), but the responsibility for collecting it has been transferred from the SBA to Treasury. Think of it like this: The SBA originated the loan and tried to work with you on repayment, but when you fell too far behind, they said “we’re done trying to work this out nicely, we’re sending it to the government’s aggressive collection division.” That division is Treasury’s Bureau of the Fiscal Service, and they have tools and authority the SBA doesn’t typically use during standard servicing.
Once your loan is referred to Treasury, the SBA is no longer involved in servicing or collection (with very limited exceptions). If you call the SBA’s EIDL servicing center, they’ll tell you the loan has been transferred and you need to contact Treasury. If you try to set up a payment plan through the MySBA Loan Portal, it won’t work because the SBA no longer controls the account. Treasury is now in charge, and all communication, payment arrangements, and collection actions go through them (or through private collection agencies Treasury might hire to assist with collection).
The referral happens administratively—you don’t go to court, there’s no hearing, there’s no opportunity to contest it before it happens. The SBA has the legal authority to refer delinquent debts to Treasury under the Debt Collection Improvement Act of 1996, and they do so as a matter of policy when loans meet certain delinquency criteria. You’ll receive notice that the referral has occurred or is about to occur, but by the time you get the notice, the decision is usually final.
When and Why Do EIDL Loans Get Referred to Treasury?
The SBA’s policy on when to refer EIDL loans to Treasury has evolved over time, especially for COVID-19 EIDL loans. Here’s the general timeline and criteria:
Delinquency threshold: Historically, the SBA refers loans to Treasury after they’ve been delinquent for approximately 180 days (roughly 6 months of missed payments). This isn’t a hard-and-fast rule—the SBA has discretion and can refer loans earlier or later depending on circumstances—but 180 days is the typical threshold. However, there have been reports that the SBA changed its policy in 2024-2025 and is now referring some loans more quickly, or is prioritizing certain categories of loans for faster referral. If you’ve received a referral notice after less than 180 days of delinquency, you’re experiencing this policy shift.
Loan size: For years, the SBA had an informal policy of not referring smaller EIDL loans to Treasury because the collection costs outweighed the likely recovery. But this changed in early 2024 when the SBA began referring COVID EIDL loans with balances of $100,000 or less to Treasury—loans that previously would not have been referred. This represented a significant policy shift and caught many small borrowers by surprise. If you owe less than $100,000 and you were referred to Treasury, it’s because the SBA changed its policy and is now pursuing collection on smaller balances that previously would have been left with the SBA or written off.
Lack of communication or payment: The SBA is more likely to refer loans quickly if the borrower has made no effort to communicate or arrange payment. If you’ve been ignoring notices, not returning calls, and making zero payments, the SBA interprets this as unwillingness to pay and refers the loan for aggressive collection. Conversely, if you’ve been communicating with the SBA, making partial payments, and trying to work out accommodations, the SBA might delay referral to give you more time. But this is discretionary—there’s no guarantee that good-faith efforts will prevent referral if you’re far enough behind.
End of accommodation programs: Many borrowers who were in hardship accommodation programs (like the Hardship Accommodation Plan that ended in March 2025) are now facing referral to Treasury because those accommodations have expired, they can’t afford full payments, and there are no longer forbearance programs available. The SBA’s policy has shifted toward expecting repayment under standard terms or aggressive collection, rather than offering extended accommodations.
Why does the SBA refer loans to Treasury? Because Treasury has collection tools the SBA doesn’t typically use during servicing, and referring delinquent debts to Treasury is a legal requirement under federal debt collection laws for agencies like the SBA. The Debt Collection Improvement Act requires federal agencies to refer debts that are more than 180 days delinquent to Treasury for cross-servicing unless there’s a specific reason not to. The SBA isn’t trying to punish you personally—they’re following federal law and policy designed to maximize collection of taxpayer-funded loans.
The Two Treasury Programs: TOP and Cross-Servicing
When your EIDL loan is referred to Treasury, it can go to one of two programs (or both):
Treasury Offset Program (TOP): The Treasury Offset Program is a centralized offset program that intercepts federal payments you’re entitled to receive and applies them to your delinquent debt. The most common offset is federal tax refunds—if you’re owed a $3,000 tax refund and your EIDL loan is in TOP, your refund gets seized and applied to the loan balance, and you receive nothing (or you receive a reduced amount if the refund exceeds the debt). TOP can also offset other federal payments, including Social Security benefits in some cases (though there are restrictions and exemptions for Social Security), federal employee salaries, federal contractor payments, and other government payments. Once your loan is in TOP, offsets happen automatically—you don’t get a chance to opt out or negotiate, you just get a notice after the fact explaining that your refund was offset to satisfy a delinquent federal debt.
Cross-Servicing Program (CSP): The Cross-Servicing Program is a more comprehensive debt collection program where Treasury takes over full servicing and collection of the debt. This includes everything TOP does (tax refund offsets), but also includes more aggressive collection actions like Administrative Wage Garnishment (seizing up to 15% of your wages if you signed a personal guarantee), reporting the debt to credit bureaus, referring the debt to private collection agencies who work on behalf of Treasury, pursuing liens and levies on property and bank accounts, and initiating legal action in some cases. When your loan is in CSP, Treasury or its contracted collection agencies become your primary point of contact. They’ll send you demand letters, call you seeking payment, propose payment arrangements, and pursue whatever collection tools are legally available based on whether you signed a personal guarantee.
Many EIDL loans end up in BOTH programs: They’re enrolled in TOP for automatic tax refund offset, AND they’re enrolled in CSP for broader collection activities. The programs aren’t mutually exclusive—they work together to maximize collection from multiple sources.
What Are the Consequences of Treasury Referral?
When your EIDL loan is referred to Treasury, several immediate and serious consequences occur:
A 30% penalty is added to your balance. This is one of the most painful aspects of Treasury referral, and when I say painful I mean DEVASTATING. Treasury adds a collection penalty equal to 30% of the outstanding principal and accrued interest at the time of referral. If you owed $100,000 when the loan was referred, the balance becomes $130,000 immediately. If you owed $250,000, it becomes $325,000. Let that sink in for a second—you wake up one morning and your debt just increased by $75,000 because of a penalty. This 30% penalty is authorized by federal law as a way to cover Treasury’s collection costs and to penalize borrowers for not paying before the debt was referred. There’s no waiver, no negotiation, no exception—the penalty is added automatically, and you now owe 30% more than you owed the day before referral. This is why its so critical to address EIDL delinquency BEFORE the loan gets referred to Treasury—once its referred, the debt increases by nearly one-third overnight and there’s nothing you can do about it.
Credit reporting (if not already reported). If your EIDL default wasn’t already reported to consumer credit bureaus (Equifax, Experian, TransUnion), it will be reported once the loan is referred to Treasury. If you signed a personal guarantee, the debt will appear on your personal credit report under your Social Security number. This destroys your credit score—a large federal debt in default can drop your score by 100+ points, making it nearly impossible to obtain new credit, finance a vehicle, get a mortgage, rent an apartment, or sometimes even get employment in fields that check credit. The default remains on your credit report for seven years from the date of first delinquency.
Tax refund offset. If you’re entitled to federal tax refunds, they’ll be intercepted and applied to the EIDL debt automatically through the Treasury Offset Program. This happens every year until the debt is paid in full—so if you typically get a $4,000 refund each April, expect that refund to be seized for years to come. You’ll receive a notice explaining that your refund was offset, but by the time you get the notice, the money is already gone.
Wage garnishment (if you signed a personal guarantee). If you personally guaranteed the EIDL loan (required for loans over $200,000), Treasury can initiate Administrative Wage Garnishment to seize up to 15% of your disposable wages directly from your paycheck—and they WILL if you have W-2 income. This doesnt require a lawsuit or court order—its an administrative process where Treasury sends a garnishment order to your employer, and your employer is legally required to withhold the specified amount and send it to Treasury. The garnishment continues until the debt is paid in full, which could be years or decades for a large balance. Imagine losing 15% of every paycheck for the next 10 years because of this debt.
Referral to private collection agencies. Treasury often contracts with private collection agencies to assist with collection of debts in the Cross-Servicing Program. You might start receiving calls and letters from a private collection agency (like Performant Recovery, CBE Group, or others that contract with Treasury) demanding payment on behalf of the federal government. These agencies work on commission—they get a percentage of what they collect—so there motivated to be persistent and aggressive (though they must still comply with the Fair Debt Collection Practices Act and cant use illegal harassment or abusive tactics, not that it always stops them from being extremely annoying).
Loss of SBA servicing options. Once your loan is with Treasury, the SBA no longer services it, and this is where things get even worse. You cant contact the SBA to request payment plans, forbearance, loan modifications, or offers in compromise. The SBA will tell you to contact Treasury. This is a major problem because Treasury is generally way less flexible than the SBA was—Treasury’s job is collection, not accommodation. While Treasury will consider payment arrangements if you contact them, there much less likely to offer generous forbearance or settlement terms than the SBA might have offered before referral. Your basically dealing with the federal government’s collection enforcer now, not a loan servicer.
Can I Get My Loan Transferred Back to the SBA?
In most cases, no—and I mean NO. Once your EIDL loan has been referred to Treasury, it stays with Treasury until its paid in full, settled, discharged in bankruptcy, or written off as uncollectible. The SBA doesnt typically take loans back from Treasury after referral, so dont waste your time calling the SBA begging them to take it back.
There are very limited exceptions where Treasury might return a loan to the SBA—for example, if there was an error in the referral (the loan wasnt actually delinquent, or you had a valid accommodation in place that should have prevented referral), or if you immediately pay the full balance including the 30% penalty, Treasury might administratively return the account to the SBA. But these situations are extremely rare. In the vast majority of cases, once your with Treasury, your dealing with Treasury for the duration, and thats just how it is.
This is why it’s so important to act BEFORE your loan is referred. If you’re struggling with payments and you know you’re approaching 180 days of delinquency, contact the SBA immediately to explore options—payment plans, extended repayment terms, hardship accommodations if available, even offers in compromise if your situation warrants it. Once the loan goes to Treasury, those SBA-administered options disappear, and you’re left with Treasury’s more rigid collection process.
What Should I Do If My EIDL Loan Has Been Referred to Treasury?
If you’ve received notice that your EIDL loan has been referred to the Treasury Department, here’s what you should do:
Step 1: Verify the referral and the balance. Contact the Bureau of the Fiscal Service (the contact information should be in the referral notice you received) and confirm that your loan has been referred, what the current balance is (including the 30% penalty), and what collection actions are planned or already underway. Get clarity on whether the debt is in TOP only (tax refund offset) or also in CSP (broader collection including potential wage garnishment).
Step 2: Determine if you have personal liability. If your loan was $200,000 or less and you didn’t sign a personal guarantee, Treasury’s collection is largely limited to tax refund offsets and pursuing business assets. They can’t garnish your personal wages or seize your personal bank accounts if there’s no personal guarantee. But if you DID sign a personal guarantee (loans over $200,000), you’re facing potential wage garnishment and levy, and the situation is more serious. Review your loan documents to confirm whether you have personal guarantee liability.
Step 3: Contact Treasury or the assigned collection agency immediately. Don’t ignore the notices hoping they’ll go away. Contact the Bureau of the Fiscal Service or the private collection agency listed in the notice and discuss your situation. Be honest: the business failed (or is failing), you can’t afford to pay the full balance, and you want to explore options. Ask about payment plans—Treasury will sometimes agree to installment plans where you make monthly payments based on your ability to pay. Ask whether settlement (offer in compromise) is possible through Treasury—while this is difficult, it’s not impossible, and if you can demonstrate genuine inability to pay the full amount, Treasury might consider a settlement. Ask what collection actions are planned and what you can do to avoid or minimize them.
Step 4: Consult with a bankruptcy attorney if the debt is unmanageable. If the balance (including the 30% penalty) is so large that you have no realistic way to repay it, and Treasury is pursuing wage garnishment or other aggressive collection, bankruptcy might be your option for eliminating the liability. EIDL debt can be discharged in both Chapter 7 and Chapter 13 bankruptcy, even after it’s been referred to Treasury. An attorney can evaluate whether you qualify for bankruptcy, what you’d have to give up, and whether it makes sense for your situation. Many bankruptcy attorneys offer free consultations.
Step 5: Protect essential income and assets if you have a personal guarantee. If wage garnishment is likely (because you signed a personal guarantee and have W-2 wages), understand that Treasury can garnish up to 15% of your disposable income—but the remaining 85% is protected. Make sure your budget accounts for the reduced income. If you have funds in bank accounts, understand that Treasury can levy accounts, so don’t keep large balances sitting in accounts that could be seized—but don’t engage in fraudulent transfers or try to hide assets illegally, because that can result in criminal charges. Consult with an attorney about legal ways to protect assets if collection is imminent.
Step 6: Respond to any garnishment or levy notices immediately. If you receive a notice of proposed Administrative Wage Garnishment or bank levy, you typically have a limited time (often 30 days) to request a hearing or challenge the garnishment. If you have grounds to challenge it (the debt isn’t yours, the amount is wrong, you’re exempt from garnishment due to financial hardship, etc.), file the request immediately. If you miss the deadline, the garnishment proceeds and you lose the opportunity to challenge it.
Step 7: Be proactive about tax refund offsets. If you know your tax refunds will be offset, adjust your tax withholding so you’re not giving the government an interest-free loan all year only to have the refund seized in April. Reduce your withholding to break even or owe a small amount at tax time, so there’s no refund to offset. This doesn’t eliminate your obligation to pay the EIDL debt, but it means you’re not losing large refunds year after year while the debt remains unpaid.
Do I Still Have Options After Treasury Referral?
Yes, though your options are more limited than they were when the SBA was still servicing the loan:
Payment arrangements with Treasury: Treasury will consider installment payment agreements where you make monthly payments based on your financial ability. These aren’t as flexible or generous as accommodations the SBA might have offered, but they can provide a structured way to address the debt and avoid more aggressive collection. Contact Treasury or the assigned collection agency to propose a payment plan.
Offer in compromise through Treasury: Treasury can settle federal debts for less than the full amount through an offer in compromise process, but this is difficult and requires demonstrating that you genuinely cannot pay the full amount and that the offered settlement represents the maximum Treasury could collect through forced collection. The acceptance rate is low, but it’s not zero. If your financial situation is genuinely dire and you can document inability to pay, an OIC might be worth pursuing.
Bankruptcy: Filing bankruptcy stops all collection actions immediately through the automatic stay, and EIDL debt (including the 30% Treasury penalty) can be discharged in Chapter 7 or Chapter 13 bankruptcy. Even after your loan has been referred to Treasury and the penalty has been added, bankruptcy remains a viable option to eliminate the debt legally. If the debt is large and unmanageable, bankruptcy might be your most realistic path to financial recovery.
Financial hardship exemptions from garnishment: If Treasury initiates wage garnishment and it would cause extreme financial hardship (you can’t afford basic necessities like rent and food after the garnishment), you can request a hardship exemption or reduction in the garnishment amount. This requires documenting your income and expenses and proving the hardship, but it can reduce or temporarily stop garnishment if you meet the criteria.
Waiting out the statute of limitations (not recommended): Federal debts don’t have the same statute of limitations as private debts. While there are time limits on how long Treasury can use certain collection tools (like 10 years for wage garnishment in some cases), the debt itself doesn’t disappear with time, and the government can renew judgments and extend collection for decades. “Waiting it out” is generally not a viable strategy for federal debt.
Talk to an SBA Debt Attorney Today
Treasury referral is a serious escalation that adds 30% to your debt overnight and subjects you to aggressive federal collection tools. But even after referral, you’re not without options—payment arrangements might be possible, settlement might be available in some cases, and bankruptcy can eliminate the liability entirely.
Our firm helps EIDL borrowers navigate Treasury referral and federal debt collection. We negotiate with Treasury and collection agencies on payment plans and settlement offers. We represent clients in bankruptcy proceedings to discharge Treasury-held SBA debt. We challenge improper garnishments and levies. We advise on legal strategies to protect income and assets during collection. And we help clients understand their rights and options when facing federal debt collection.
If your EIDL loan has been referred to Treasury, or if you’ve received notice that referral is imminent, contact us today for a free consultation. We’ll review your situation, explain exactly what collection actions you’re facing, evaluate whether you have personal guarantee liability, assess whether bankruptcy or settlement makes sense, and advise on the strategy to address the debt and minimize financial damage. The consultation is free and confidential, but it could be the difference between facing Treasury collection blindly and having a plan to protect yourself.
Treasury referral is serious, but it’s not the end. Call us now to explore your options.