Do You Have to Pay Student Loans If You Move to Another Country?

Moving to another country does not eliminate the obligation to repay student loans. The legal requirement to repay these loans persists regardless of international residency, applying to both federal and private student loans.

Your Student Loan Obligation Abroad

Student loans, whether federal or private, remain a legal obligation even if a borrower moves outside the United States. The U.S. government and private lenders maintain the authority to collect on these debts.

Federal student loans are governed by U.S. law and agencies, ensuring the obligation persists globally. The U.S. government has various mechanisms to pursue collection, even when borrowers reside internationally.

Private student loans are also binding agreements between the borrower and a private lender. While private lenders might face certain challenges in pursuing collection actions internationally compared to federal loans, the debt itself does not cease to exist, and non-payment can severely impact a borrower’s U.S. credit score. Defaulting on either federal or private loans can result in long-term negative impacts on financial standing.

Practicalities of Paying From Overseas

Making student loan payments while residing outside the U.S. requires careful planning to ensure timely and efficient transfers. Most loan servicers provide online payment portals, which are often the most straightforward method for borrowers to make payments from abroad. Update contact information with the servicer to receive important notifications.

International wire transfers or Automated Clearing House (ACH) payments can facilitate payments from a foreign bank account to a U.S. loan servicer. Fees for international wire transfers typically range from $5 to $75, depending on the bank and currency. Maintaining a U.S. bank account is recommended, as some federal student loan servicers require payments to originate from a U.S.-based account.

Currency conversion is another consideration, as fluctuating exchange rates can impact the final amount received by the loan servicer. Banks and money transfer services may apply a markup to the interbank exchange rate, which can affect the total cost of the transfer. Borrowers should monitor exchange rates and consider using services that offer competitive rates to minimize conversion costs. Setting up automatic payments from a U.S. bank account, if feasible, can help ensure payments are made consistently and on time, and some servicers offer interest rate discounts for using this method.

Understanding Income-Driven Repayment With Foreign Income

Federal student loan borrowers living abroad remain eligible for Income-Driven Repayment (IDR) plans, which adjust monthly payments based on income and family size. For those earning income abroad, the Foreign Earned Income Exclusion (FEIE) allows eligible U.S. citizens and resident aliens living and working abroad to exclude a certain amount of foreign-earned income from their U.S. taxable income; for 2024, this exclusion can be up to $126,500.

When calculating IDR payments, the Department of Education considers the Adjusted Gross Income (AGI) reported on the U.S. tax return. By utilizing the FEIE, a borrower’s AGI can be significantly reduced, potentially lowering IDR payments to as little as $0, depending on the amount of excluded income and other financial factors. To claim the FEIE, borrowers must file Form 2555 with their U.S. tax return.

Annual recertification is required for IDR plans, even for borrowers abroad. This process involves providing documentation of income, such as U.S. tax returns (even if showing $0 income due to FEIE) or foreign income statements. Aligning the timing of tax filing with IDR recertification helps ensure the most current AGI is used for payment calculations.

Addressing Financial Hardship and Default

If a borrower living abroad faces financial difficulties, federal student loan programs offer temporary relief options like deferment and forbearance. Deferment allows for a temporary postponement of payments, during which interest may not accrue on subsidized federal loans but does on unsubsidized loans. Forbearance also suspends payments, but interest generally accrues on all federal loans during this period and may capitalize, meaning it is added to the principal balance. Eligibility for these options depends on specific circumstances, such as unemployment or economic hardship, and requires contacting the loan servicer and providing documentation.

Defaulting on student loans, regardless of residency, carries serious consequences. For federal loans, default occurs after 270 days of missed payments. This can lead to severe repercussions, including damage to the borrower’s U.S. credit score, making it difficult to obtain future credit or housing upon returning to the U.S. The U.S. government can also pursue administrative wage garnishment if the borrower works for a U.S.-based employer abroad, offset U.S. tax refunds, and seize federal benefits like Social Security payments.

Once in default, borrowers lose eligibility for federal student aid and flexible repayment plans. Paths to resolve default for federal loans include loan rehabilitation, which involves making nine on-time monthly payments, or loan consolidation, where a new Direct Consolidation Loan pays off the defaulted loans. These options help borrowers return their loans to good standing and regain access to federal student loan benefits.