During the Vietnam War, an 40,000 American men dodged the draft and fled to Canada, leaving behind family, friends and the hope of returning home without facing severe criminal penalties.
These conditions weren’t lifted until a little over decade later when an official pardon from President Jimmy Carter allowed them to return to U.S. soil.
There’s a similar phenomenon emerging nowadays: Recent college graduates facing massive student loan debt are fleeing abroad, embarking on a personal exodus to avoid paying off their loans.
The only problem is that, like with those draft dodgers of the 1960s, running away can spell major trouble for their finances.
How to get out of student loan debt: Move overseas?
If you’re a struggling student loan borrower, you might see leaving the U.S. as the right move for many reasons. Perhaps another country offers brighter job prospects to increase your income, for example. Or maybe the lower cost of living in a less developed nation could mean easier managing of your everyday expenses.
But if escaping your debt is the real motivation to skip town, be aware that the consequences could catch up to you. That goes for both federal and private education debt.
Keep in mind, for example, that there’s no statute of limitations on your federal student loans, meaning the government could take you to court no matter when you return to the U.S.
And although your state’s laws might keep private lenders’ lawyers at bay after a set number of years, that won’t stop collections agents from demanding payments. Meanwhile, the statute of limitations protecting you from a lawsuit could be reset by a small move, such as making a payment.
Unfortunately, that’s just the first of many reasons why fleeing the country to dodge your debt isn’t a wise move.
Why you can’t escape student loan debt overseas
Consider five reasons why leaving the country might not be a realistic solution to get rid of your student loans.
1. Your student loans won’t go away
Nothing will absolve you from your student loans or make them magically disappear, not even moving to another country. Interest will continue to accrue, and your overdue payments will keep racking up.
The most viable option for pausing payments is to seek deferment or forbearance. The federal government offers many ways to take a break from your repayment. If you’ve suffered a job loss and can’t replace your paycheck, for example, you could defer your loan payments for up to three years.
And if reducing federal loan payments would help your situation, consider income-driven repayment plans. Your lender will only ask you to pay a percentage of the income you bring in each month.
If you have private loans, meanwhile, income-driven repayment won’t be available, but check to see if your lender offers any form of deferment — some, though not all of them, do have this option.
2. You could lose most of your U.S. financial privileges
Dodging your federal student loan debt could prevent you from taking advantage of some financial rights and privileges if you hope to move back to the U.S. after a stint in some far corner of the world.
If caught, the IRS might come after you for your unpaid debts, taking penalties straight from your income-tax refund. If you come back home and find a job, you might even have your wages garnished. Or if you expect to ease into retirement upon your return to the States, remember that the government could hold onto your Social Security benefits.
3. Your credit will take a big hit
When your lender reports your loan as delinquent or, worse, in default, the mark could stay on your U.S. credit report for up to seven years.
A marked-up credit report or reduced score will make your efforts at taking out more loans, getting a new credit card or applying for a mortgage much more difficult or costly once you return to America.
4. You might have to resort to using cash only
Leaving the country for some European paradise might sound good in theory, but in reality, you might find that you’ve traded your student loans for another tough financial situation.
You might need to stick to transacting with cash only. Establishing a credit history could be difficult if you’re not an official resident of your new country and you’ve got a boatload of student loan debt back home.
On top of that, will you have enough cash on hand to buy a home, make investments or establish residency? If you do have such funds, you might as well just pay off those loans here in the U.S.
5. Your family might have to shoulder your student loan debt
You might be lying on some beach in the Greek islands or sitting at a cafe in Brazil, thinking your student loan providers can’t touch you. But back home, your cosigners (if you have any) will be the ones responsible for repaying your debt.
Just as with any cosigned loan, lenders go after the next name on the contract. If you care about troubling your cosigner this way, be an adult, stay home and make those payments.
That’s your best solution to tackling significant student loan debt. Making a budget could also help you hack away at that debt balance. If you must relocate, don’t do it to escape your financial situation.
In fact, if you want to become a legitimate expat, do it the right way:
- Find a country with a reasonable cost of living
- Obtain the appropriate visa for your stay
- Seek a paying job that helps you become financially fit
Then not only will you get to experience another culture, but you’ll also further your career and pay off your debt abroad.
Paul Sisolak contributed to this report.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.97%1||Undergrad & Graduate|
|2.47% – 6.99%3||Undergrad & Graduate|
|2.68% – 8.96%4||Undergrad & Graduate|
|3.23% – 6.65%2||Undergrad & Graduate|
|2.61% – 7.35%5||Undergrad & Graduate|
|3.00% – 9.74%6||Undergrad & Graduate|