You’ll still be responsible for repaying your student loans after moving overseas. You ought to have an American bank account and have your education loans paid off automatically. To lower your monthly payment, you could also be eligible to use the foreign income you earn exclusion on your tax return.
Relocating abroad can be difficult if you owe money on your student loans. To guarantee that you continue to make your loan payments on schedule and perhaps even reduce them, there are a few easy steps you can take. What you should know is as follows;
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Continue Using Your Banking In The States
Certain federal student loan servicers require that payments come from or be paid with funds based in the United States of America. Because of this, even if you have no intention of returning to the United States in the near future, you should keep your stateside bank account open when you relocate.
Additionally, you must maintain sufficient funds in the account to pay off your student loans and cover any other required transactions. This can be accomplished by using a digital money transfer provider or by scheduling frequent wire transactions. However, keep in mind that sending and receiving international wire transfers can incur fees from banks and credit unions, which could raise your expenses.
Even though money transfer services could have fees, they might nevertheless be less expensive. You may also keep an account with a U.S. bank that is globally recognized, like Chase or Citi, depending on where you live.
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Establish Autopay
Establishing automated payments from your US bank account is the easiest approach to keep current on payments. In this manner, you won’t have to stress about forgetting to physically pay each month or about waiting for a printed bill to arrive.
Additionally, if you set up autopay, a lot of private lenders and student loan servicers will lower your interest rate. You can set up autopay online, but to prevent payments being returned for lack of cash, make sure you keep a buffer in your bank account.
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Verify the Contact Information on Your Student Loan Servicer Is Up to Date
It might be necessary for your student loan servicer to get in touch with you occasionally to give you account updates. To ensure you don’t miss any crucial communications that could have an impact on your payments, update your contact information online, particularly your address and phone number.
As an alternative, you can ask to get all of your correspondence online. If you choose this option, please remember to maintain your email address up to date so that you can be notified as soon as new correspondence becomes available.
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Revise Your Payback Schedule
Income-driven repayment (IDR) plans are one of the payment relief choices available to borrowers of federal student loans.
The foreign-earned income exclusion may enable you to maximize the benefits of an IDR plan if you intend to live overseas for an extended period of time. When filing a U.S. tax return, you can deduct foreign earnings from your revenue by using the IRS’s foreign earned income exclusion.
The highest amount you can deduct for 2024 is $126,500, but that amount is subject to annual inflation adjustments. Your student loan servicer will utilize your adjusted gross income from your tax return which does not include your excluded overseas earnings when you apply for an IDR plan. You may be eligible for debt forgiveness in the future, and your monthly payment may be as little as $0 depending on any additional income you may have.
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Just remember that regardless of whether your payment is insufficient to satisfy the interest, it will still accumulate. If you are able to use the overseas earned income exclusion again after returning to the United States, some IDR plans will include your unpaid interest in your balance. Consider qualifying for the SAVE plan, which doesn’t capitalize overdue interest, to prevent a rising balance.
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Fight the Want to Quit Making Payments
While some debtors have relocated overseas in an attempt to avoid paying back their student loans, it’s crucial to keep in mind that your debt will not disappear.
When it comes to late payments and default, the federal government is more forgiving than private lenders. Typically, a late payment is not reported to credit bureaus by your loan servicer until it is ninety days past due, and you are not deemed in default until around nine months have passed without a payment.
The government may garnish your income and bank account, withhold tax refunds and government benefits, and take other legal measures to recoup the outstanding balance if your loans are in default.
Missing payments and defaulting could also negatively impact your credit, making it more difficult to get inexpensive credit later on if you intend to return to the United States.
Conclusion
Even if you have no intention of returning to the United States in the near future, it’s crucial to continue managing your student loans responsibly, regardless of whether you already have expat status or are preparing to move abroad. While you’re at it, it’s a good idea to periodically check your credit in order to be alert to any fraudulent activity as well as other potential problems that can lower your credit score.