Managing Student Loans While Living Abroad: A Comprehensive Guide

Moving to a different country can be an exciting adventure, but if you have student loan debt, it can also present some unique challenges. However, with a few strategic steps, you can ensure that you continue to pay your student loans on time and possibly even minimize your payments. Here’s what you need to know to manage your student loans effectively while living abroad.

Keep a Stateside Banking Presence

One of the first things you need to do is maintain a U.S. bank account. Many federal student loan servicers require payments to be made from a U.S. bank account or with U.S.-based funds. Even if you don’t plan to return to the U.S. anytime soon, keeping a stateside bank account is crucial.

Ensure that your account is funded with enough cash to cover your student loan payments and any 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 can add to your costs. Money transfer services may also charge a fee, but it might be less expensive.

Depending on where you live, you might also consider maintaining an account with a U.S. bank that has an international presence.

Set Up Autopay

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

Many student loan servicers and private lenders offer a discount on your interest rate if you enroll in 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. It’s essential to update your contact details, including your address and phone number, in your online account to ensure you don’t miss out on important communications that could affect your payments.

Alternatively, you can request to receive all of your communications online. 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, O1ne Mortgage is here to help. Call us at 213-732-3074 to speak with one of our expert loan officers. We are committed to providing you with the best service and helping you navigate your financial journey with ease.