How to Handle Student Loans as an Expat

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Managing Student Loans While Living Abroad

If you have student loan debt and are planning to move to another country, it can present some challenges. However, there are a few simple steps you can take to ensure that you continue to pay your student loans on time and possibly even minimize your student loan payments. Here’s what you need to know.

Keep a Stateside Banking Presence

Some federal student loan servicers require payments to be made from a U.S. bank account or with U.S.-based funds. Therefore, it’s essential to maintain your U.S. bank account when you move, even if you don’t plan to return to the U.S. soon.

Ensure the account has enough funds to cover your student loan payments and other necessary transactions. You can achieve this by setting up regular wire transfers or using an online money transfer service. Be aware that banks and credit unions often charge fees for international wire transfers, which could add to your costs. Money transfer services may also charge a fee, but it may still be less expensive.

Depending on your location, you could also maintain an account with a U.S. bank that has an international presence.

Set Up Autopay

The simplest way to stay up to date on payments is to set up automatic payments from your U.S. bank account. This way, you don’t have to remember to pay manually each month or worry about delays in getting a paper bill.

Many student loan servicers and private lenders offer a discount on your interest rate if you’re on autopay. You can set up autopay through your online account, but make sure you maintain a buffer in your checking account to avoid returned payments due to insufficient funds.

Update Your Contact Information

Your student loan servicer may need to contact you from time to time to provide updates about your account. Update your contact details, including your address and phone number, in your online account, so you don’t miss out on important communications that could affect your payments.

Alternatively, you can request to receive all of your communications online, but in that case, make sure you keep your current email address updated so you can receive notifications when communications are available to you.

Update Your Repayment Plan

Federal student loan borrowers can take advantage of several payment relief options, including income-driven repayment (IDR) plans.

If you’re planning to live abroad for a long time, the foreign-earned income exclusion could help you make the most of an IDR plan. With the foreign earned income exclusion, the IRS allows you to exclude foreign earnings from your gross income when filing a U.S. tax return. For 2024, the maximum amount you can exclude is $126,500, though that figure adjusts annually with inflation.

When you apply for an IDR plan, your student loan servicer will use your adjusted gross income from your tax return, which won’t include your excluded foreign earnings. Depending on any other income you have remaining, your monthly payment could be as low as $0, and you could qualify to have your debt forgiven down the road.

Just keep in mind that interest will continue to accrue, even if your payment isn’t enough to cover it. Some IDR plans will add your unpaid interest to your balance, which could cause problems if you return to the U.S. and can no longer rely on the foreign earned income exclusion. To avoid a ballooning balance, consider applying for the SAVE plan, which doesn’t capitalize unpaid interest.

Resist the Temptation to Stop Making Payments

Some student loan borrowers have moved abroad as a way to escape their student loans, but it’s important to remember that your debt won’t go away.

The federal government offers more leniency than private lenders when it comes to missed payments and default. Generally, your loan servicer won’t report a late payment to the credit bureaus until it’s 90 days past due, and you won’t be considered in default until you’ve gone roughly nine months without making a payment.

If your loans are in default, the government can garnish your wages and bank account, withhold tax refunds and government benefits, and pursue other actions to collect what you owe.

Additionally, if you have plans to return to the U.S., missing payments and defaulting could take a toll on your credit, making it difficult to obtain affordable credit when you need it.

The Bottom Line

Whether you’re planning on moving abroad or you already have expat status, it’s important to continue to manage your student loans responsibly, even if you aren’t planning to return to the U.S. in the future.

While you’re at it, it’s also a good idea to monitor your credit regularly to keep an eye out for fraud and other potential issues that could negatively affect your credit score. With Experian’s free credit monitoring service, you’ll get access to your FICO® Score☉ and Experian credit report, along with real-time alerts when changes are made to your report.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to help you with all your mortgage needs.

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