What Happens to Student Loans If You Move Abroad?
While moving abroad can open doors for new adventures and give you a fresh start, it doesn’t allow you to escape your student loan debt.
No matter where you live, you’ll remain tied to your school debt payments. However, knowing what happens to student loans if you move abroad, and doing a little planning ahead of time, can help keep your travel dreams on track.
Does student loan debt follow you to another country?
Unfortunately, student loans will follow you wherever you go — at least until they’re fully repaid, forgiven or otherwise dealt with. But until then, you’re on the hook for repayment.
If you move overseas and ignore your federal student loans, the U.S. government has ways to collect what’s owed — such as garnishing your wages (if you work for a U.S.-based company) or seizing Social Security benefits and future tax refunds.
And while private lenders might not necessarily be able to sue you while living abroad, the missed payments could negatively hurt your credit score.
Private and federal student loan defaults can remain on your credit report for up to seven years, impacting various aspects of your life. For example, a prospective employer might review your credit as part of a security clearance or background check. Having bad credit could also limit your opportunities to buy a house or open a credit card.
While these issues might not affect you while living abroad, they could hit hard if and when you decide to return to the U.S.
How to manage student loans from abroad
Leaving the country with unpaid debt isn’t a crime. But you’ll need to create a plan to ensure you don’t fall behind on repayments or go into default while living abroad.
Here are four ways to stay on top of payments while traveling the globe.
1. Update your contact info
Your loan provider should have your most up-to-date information before you leave to study or work abroad. This way, you can rest assured you won’t miss any critical correspondence.
Start by tracking down your student loan servicers via your StudentAid.gov account — the dashboard will list your current federal loan servicers. As for your private loan servicers, you can find them by requesting a free credit report.
Next, log into each account, go to your profile and click on your contact information. You can also contact your loan servicer via telephone and speak to a representative directly.
Which address to use?>
You can either provide your international address or use a permanent U.S.-based address back home. A parent’s or grandparent’s mailing address is a good idea if you want to keep your mail within the U.S.
2. Set up autopay
Enabling automatic payments is the best way to ensure you don’t skip a student loan payment abroad. You can typically set up autopay online via your loan servicer’s website.
With autopay, you won’t have to worry about sending a check overseas or missing a due date. As an added perk, many loan servicers and lenders even offer a quarter-percentage-point interest rate deduction for setting up autopay.
3. Get your bank accounts in order
Some banks, like Chase and CitiBank, have global branches; meanwhile, others are limited to the U.S. and charge substantial fees for foreign transactions. If earning money abroad, opening a new account with an international or global bank can help avoid extra charges.
However, your student loan servicers will withdraw payments from your home account, so be sure to link your new international account to it.
In addition, check to see if your U.S. bank accepts electronic transfers from foreign banks. If so, set up automatic transfers once a month to cover student loan payments — or build up your savings before you go, in order to cover your monthly payments while away.
4. Avoid going into default
It’s easy to get caught up in a whirlwind of adventure when you move abroad (and let’s be honest, student loans will likely be the last thing on your mind).
But, as mentioned, you can’t run away from student loan debt by moving out of the country. If you don’t make your scheduled payments for more than 270 days, your federal loans will generally go into default.
A student loan default can have long-term consequences that are difficult to shake off. For instance, a bad credit score could make it difficult to take out future loans, limiting your options if you decide to return to school.
By following the steps above, you can hopefully avoid stressing out about your bills and focus instead on your new adventure.
How to reduce student loan payments while living abroad
If your student loans are a huge burden, you can take steps to reduce your monthly payments. Student loan payments can be pretty steep — keeping them as low as possible can help you fully enjoy your out-of-the-country experience.
Here are four ways you might reduce the monthly payment amount on your student loans.
- Apply for student loan forgiveness
- Switch to an income-driven repayment plan
- Consider student loan deferment or forbearance
- Refinance or consolidate your student loans
1. Apply for student loan forgiveness
Various student loan forgiveness programs can erase part — or even all — of your student loan debt.
One of the most popular options is Public Service Loan Forgiveness (PSLF), which forgives your remaining federal loan balance after making 120 on-time payments while working for a qualified employer.
However, moving to another country could halt your progress toward forgiveness unless you continue working for the same organization. For example, military members deployed overseas can continue counting their payments toward PSLF. Similarly, time served in the Peace Corps counts toward PSLF.
Be sure to read the guidelines for your specific forgiveness program, and talk to your loan servicer to make sure you don’t ruin any progress you’ve made so far.
2. Switch to an income-driven repayment plan
If you struggle to make monthly payments, you might qualify for an income-driven repayment (IDR) plan. These plans lower your federal loan’s monthly payments based on your family size and income, with forgiveness granted after 20 or 25 years.
The good news is that the Foreign Earned Income Exclusion could allow some borrowers living abroad to deduct up to $120,000 of worldwide income on their tax return. As a result, your income could be $0, causing your IDR payment to also drop to $0.
The downside to income-driven repayment plans>
While lowering your monthly payments could help prioritize your travel adventures, it’s not necessarily the best solution for managing your student loan debt.
For example, making no payments over decades could leave you a hefty balance due to accrued interest. Although this amount could eventually be forgiven, you might owe tax on it. Congress is currently waiving tax on forgiven student loans, but this could change after 2025.
3. Consider student loan deferment or forbearance
Certain circumstances, such as a significant drop in income, might allow you to qualify for a deferment or forbearance when you move abroad. Both options can postpone your federal student loan payments while you get settled on your feet.
The main difference between the two is how interest is handled:
- Deferment: Interest accrues for unsubsidized federal loans but not for subsidized federal loans.
- Forbearance: Interest accrues and capitalizes for all federal loans.
In some cases, you might be eligible for a mandatory student loan forbearance, such as while serving overseas in the Peace Corps.
4. Refinance or consolidate your student loans
Another option for reducing your monthly bill is to refinance or consolidate your student loans. It’s best to do this before moving abroad, so you’ll have one less thing to worry about.
- Private student loan refinance: Refinancing combines your various loans into a new loan, ideally with a lower interest rate. You can also opt for a longer repayment term if you want more flexibility, though it’ll cost more interest in the long run. While you can refinance federal loans, it’s best to avoid it since you’ll lose the special government benefits and protections that only federal loans have.
- Federal student loan consolidation: Your new interest rate will be the weighted average of all your consolidated federal loans rounded up to the nearest one-eighth of a percent. Even though federal loan consolidation doesn’t lower your interest rate, it can lower your payment by extending your repayment term.
The benefit of refinancing>
A key advantage of refinancing or consolidating your loans is simplifying your monthly payment. Instead of tracking multiple loans, interest rates and servicers while abroad, you can streamline your debt into one or two easy-to-manage loans. But for refinancing (as opposed to consolidation) you should usually only move forward if you can secure a lower interest rate.