With the student loan debt crisis only getting worse, many borrowers might be be tempted to leave the country and live debt-free. Can it work? Yes. Is it a good idea? Not if you ever want to return to the US later in your life.
Moving doesn’t freeze the debt that you owe
Your student loan debt is still considered active when you leave the country, and that debt will accumulate through interest and late fees. While it’s a myth that student loans can’t be discharged through bankruptcy, negotiating a discharge isn’t always successful. Bankruptcy is not to be taken lightly, either—it murders your credit score.
You won’t necessarily be isolated from the IRS living abroad either, as they can still garnish 15 percent of your wages for federal loan payment if you work for a US-based company, according to Debt.com. Private loans do have a statute of limitations, but you’re also out of luck here—the limitation can be paused if lenders can prove you’ve left the country. If you have co-signers on your loans, you’ll really want to rethink leaving your debts behind, as they’ll be on the hook for it (and easier to find).
Lastly, if you change your mind later and return to the US, you will become an immediate target of debt collectors. Wages can be garnished, you can be charged late penalties, or even be sued.
Fortunately there are a number of options available for federal student debt relief: Check out Lifehacker’s posts on student loan forgiveness and refinancing for more information. If you’ve been abroad in the military or in the Peace Corps with unpaid student loans you can also qualify for loan forgiveness.
Private student loans don’t have the same built-in protections as federal loans, but you can always contact your lender to negotiate better terms. Private lenders want to ensure they get paid, so they’ll likely agree to lower your monthly payments or offer a limited period of deferment.
You have to be fully committed to living in exile if you truly want to leave your student loan debt behind. This decision should not be taken lightly or be based entirely on the short term—especially if you’re younger and in your twenties and, say, the election doesn’t go your way in November. Just remember you’re making this decision for all your future selves—circumstances change, people change, but the debt will remain.