How to Pay US Student Loans From Overseas

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Stanley Tate

#1 Student Loan Lawyer

Updated on November 8, 2022

Expats with large federal student loan balances should switch to an income-driven repayment plan, use the Foreign Earned Income Exclusion to zero out their earnings on their US tax return, and wait for their loans to be forgiven after they’ve made 20+ years of payments. Those with private student loans should keep a U.S.-based bank account and enroll in auto-pay — or strategically default and see what happens.

You can get all of your federal student loan debt forgiven simply by moving to another country. And get this, you don’t need to renounce your citizenship or give up your passport. You just need to enroll in an income-driven repayment plan, file a tax return each year, and live abroad for at least two decades. Just stay away and try to forget what you owe.

This loophole only exists for federal student loans. The rules are different for private student loans. You’ll need to keep making the monthly payments on those until they’re paid off. If you can’t do that and cover your cost of living, look to refinance for a lower interest rate and longer repayment term. You can also strategically default in hopes of cutting a deal to pay less or waiting for the statute of limitations to run out.

Keep reading to learn more about paying your US student loans overseas.

Related: What Happens if You Don’t Pay Student Loans and Leave the Country?

Can you move to another country with student debt?

If you decide to move to a different country after taking out student loans, neither the government nor private lenders will stand in your way. You can leave the country and still access most loan forgiveness programs and repayment options. The truth is your lenders don’t care where you live as long as you pay your bills on time.

Related: Student Loan Forgiveness Living Abroad

Living abroad and paying student loans

The Education Department offers repayment options that use your adjusted gross income to calculate your monthly payment. Meanwhile, the IRS allows taxpayers who live and earn income in another country to avoid paying taxes on that income. The result? Zero taxable income and thus a zero-dollar monthly payment under any income-driven repayment plan. And because each IDR plan includes student loan forgiveness after at least 20 years of making payments, borrowers can repeat this process for two decades and have their balance erased.

Plus, for a limited time, the Department of Education is giving borrowers credit towards student loan repayment forgiveness even if they never enrolled in an IDR Plan. Nearly all borrowers qualify for this added benefit, but some will need to apply for a Direct Consolidation Loan before next July to meet the eligibility requirements.

Related: One-Time Payment Count Revision for Eligible IDR Borrowers

US Citizens and aliens can take advantage of the Foreign Earned Income Exclusion (FEIE) so long as they earn income abroad and keep their home overseas for an entire tax year.*

The catch: Each year, you’ll need to recertify your income by submitting the IDR Form to your loan servicer. Read more about when to recertify income-based repayment.

Also, 20 years is a long time, and interest will continue to grow. But it remains true that moving abroad could free you from the shackles of student loan debt.

*While you may not have to pay US income tax on your foreign earnings, you will almost certainly have to pay local taxes in the country where you live.

What if you have to make payments?

How If your income doesn’t drop your AGI to zero in your new country and you have to pay on your loans, here’s what you’ll need to pay US student loans from overseas:

  • Get a US-bank account. Most loan servicers only accept payments from a US-bank account or an international bank with domestic locations. Credit card payments generally aren’t accepted without using a third-party bill pay service like Plastiq.

  • Enroll in automatic payments. Mailing payments each month or calling them in is an unnecessary hassle. Also, many servicers offer a small interest rate reduction for enrolling in autopay.

  • Update your contact information. Although you’ve moved, you’ll want to keep a physical mailing address — not a PO Box — and phone number in the US. Having both will make it easier to make payments on your account, consolidate, refinance, etc. Use a virtual mailing service like Earth Mail to access your postal mail online.

  • File a federal tax return annually. If getting your debt forgiven after 20 years of payments sounds good, you’ll want to stay enrolled in the IBR plan of your choice. The easiest way to do that is to file a tax return annually and use that as proof of your income when recertifying.

Paying private student loans

Private lenders don’t offer the same benefits for their loans. They won’t lower permanently lower your payment amount. At best, they may grant you a temporary deferment or forbearance. But those periods of relief are short-lived. Once they run out, you’ll have to keep making your private student loan payments or risk default.

Your options at that point are to explore student loan refinancing in the hopes of lowering your payment by grabbing a lower interest rate and longer repayment term or stop paying and see what happens.

Refinancing is often the better choice if you have a co-signer. You’ll protect their credit score and them from being sued, and you may be able to get them released from the loan. But in many cases, refinancing does nothing more than kick the can down the road — especially when you factor in currency exchange rates.

Related: Best Student Loan Refinance Companies

Some student loan borrowers see the writing on the wall and decide to stop paying altogether. While going this route will add late payments to your credit history, it could lead to you negotiating a payoff for much less than your current balance. It’s also possible that the statute of limitations could expire, and you’ll walk away from the debt relatively unscathed. In all of my years as a student loan lawyer, I’ve never seen a private student loan company sue a borrower in a foreign country.

Learn More: What Happens if You Default on Private Student Loans?

Bottom Line

Paying US student loans while living overseas can be a hassle. You usually have to keep a banking relationship and other ties with the US in order to make your payments. The time difference and shoddy customer service can also add to the difficulty.

The tradeoff for that stress is the promise of loan forgiveness — at least for your federal student loans.

I’ve helped dozens of borrowers like you who have moved overseas or are contemplating the move find the right strategy to tackle their student loan debt. Schedule a call with me so that I can help review your situation and determine the best course of action to deal with your loans.

UP NEXT: Biden Student Loan Forgiveness

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