Can You Save Your Student Debt by Leaving the Country?

As the student loan debt crisis only gets worse, many borrowers may be tempted to leave the country and live without debt. Maybe this will work? Yes. Is this a good idea? Not if you ever want to return to the US later in your life.

Moving does not freeze your debt

Your student loan debt is still considered active when you leave the country and this debt will accumulate through interest and late fees. While it is a myth that student loans cannot be repaid as a result of bankruptcy, layoff negotiations are not always successful. Bankruptcy shouldn’t be taken lightly either – it kills your credit score.

According to Debt.com, you will not necessarily be isolated from the overseas IRS as they can still withhold 15 percent of your wages to pay off a federal loan if you work for a US company. Private loans have a statute of limitations, but here, too, you are out of luck – the restriction can be suspended if the lenders can prove that you have left the country. If you have co-followers for your loans, you should really consider leaving your debts behind as they will be on the hook (and easier to find).

Finally, if you later change your mind and return to the US, you will immediately become the target of debt collectors. Wages may be withheld, you may face penalties for late payment, or even be sued.

Other options

Fortunately, there are a number of options for writing off federal student debt: check out Lifehacker’s publications on student loan forgiveness and refinancing for more information. If you were overseas in the army or in the Peace Corps and had unpaid student loans, you can also apply for loan forgiveness .

Private student loans do not have the same built-in protection as federal loans, but you can always contact your lender to negotiate better terms. Private lenders want to ensure they get paid, so they will likely agree to lower your monthly payments or offer a limited grace period.

Bottom line

You must fully commit yourself to living in exile if you really want to leave student loan debt. This decision should not be taken lightly or based solely on the short term, especially if you are younger and in your twenties and, say, the elections in November are not good for you. Just remember that you are making this decision for all of your future selves – circumstances change, people change, but debt will remain.

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