Previous generations might have left the U.S. to avoid fighting a war. Current generations are similarly wondering if they can escape debt by leaving the country.
Unfortunately, fleeing to a far-off country or even just moving to Canada to avoid student loans is a strategy fraught with pitfalls. Yes, you could leave your debt behind, but it could still be here upon your return. And even if you’re not planning a round trip, you could risk cutting ties to your home country, harming your credit and assets in the U.S. and potentially leaving a family member to clean up your mess.
So before you try to escape debt by leaving the country, ensure you’ve considered all the ways it could go wrong.
- Can you escape student loan debt by fleeing the country?
- What about moving to Canada to avoid student loans?
- What are the problems with escaping student loan debt overseas?
- Plus: How to tackle your student loans with or without fleeing the country
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, 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 statutes of limitations 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.
This solution was previously used for a very different problem. During the Vietnam War, an estimated 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.
As for moving to Canada to avoid student loans, the U.S. government won’t chase you down like they do in the movies. It would be too costly to file a judgment against you in an American court only to hope a Canadian court will hold you accountable for your now-foreign debt.
The only problem is that like with those draft dodgers of the 1960s, running away can spell major trouble for your finances. So before you run off and move to Canada or another locale, keep reading.
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
2. You could lose most of your financial privileges
3. Your credit will take a big hit
4. You might have to resort to using cash only
5. Your family might have to shoulder your debt
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 (IDR) 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.
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.
Overseas or at home, if you don’t pay back your loans, it’ll harm your credit report and scores. After all, payment history comprises 35% of your credit score, according to FICO.
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 the U.S.
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.
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, consider staying home and making those payments.
Even if you don’t have a cosigner, you might not be scot-free. If you were to leave assets behind in the U.S. and your credit becomes aware of them, they could be vulnerable in litigation. Consulting a student loan lawyer might be wise.
Your best solution to tackling significant student loan debt might be staying right where you are — but setting a different path forward.
Making a budget, for example, could help you hack away at that debt balance. Here are some other strategies to consider:
- Switching repayment plans: If you have federal student loans, you can switch to an IDR plan to lower your monthly payment. If you have private loans, you’ll need the sympathetic ear of your lender or loan servicer.
- Repayment assistance programs: Look into state- and employer-based repayment assistance programs that help borrowers repay debt, typically in exchange for working in a particular field.
- Student loan refinancing: If your private lender won’t help you adjust your repayment plan and you can’t get repayment assistance, you could refinance your education debt with a lender that will be more helpful. You might refinance with a bank or company to lengthen your loan term and lower your monthly dues, for example.
And if you still want to relocate to Canada or elsewhere, think differently about living abroad with student loans. 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
Also, investigate your eligibility for the IRS’ foreign earned income exclusion: If you are able to make money abroad but have an adjusted gross income of $0 in the States, you could qualify for a $0 monthly payment on an IDR plan that leads to eventual loan forgiveness. Learn more about this strategy using our guide to paying U.S. student loans from overseas.
Paul Sisolak contributed to this report.
Interested in refinancing student loans?Here are the top 9 lenders of 2022!
|Lender||Variable APR||Eligible Degrees|
|1.74% – 8.70%1||Undergrad & Graduate|
|1.74% – 7.99%2||Undergrad & Graduate|
|1.74% – 7.99%3||Undergrad & Graduate|
|1.89% – 5.90%4||Undergrad & Graduate|
|1.74% – 7.99%5||Undergrad & Graduate|
|2.05% – 5.25%6||Undergrad & Graduate|
|1.86% – 6.01%||Undergrad |
|N/A7||Undergrad & Graduate|
|1.99% – 8.38%8||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 4, 2022.
2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
Student Loan Refinance Interest Rate Disclosure Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 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%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Let us know if you have any questions and feel free to reach out directly to our team.
3 Important Disclosures for SoFi.
Fixed rates range from 3.49% APR to 7.99% APR with a 0.25% autopay discount. Variable rates from 1.74% APR to 7.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.
4 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of April 29, 2021. Information and rates are subject to change without notice.
5 Important Disclosures for Navient.
6 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.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 5/17/2022 student loan refinancing rates range from 2.05% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.93% Fixed APR with AutoPay.
7 Important Disclosures for PenFed.
Fixed Rate Loan Terms: 5 years/60 monthly payments, 8 years/96 monthly payments, 12 years/144 monthly payments or 15 years/180 monthly payments. Annual Percentage Rate is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed rates range from 3.29% to 5.43% APR. Rates are subject to change without notice. Fixed APR: Fixed rates will not change during the term. This rate is expressed as an APR. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
8 Important Disclosures for CitizensBank.
Education Refinance Loan Rate Disclosure: Variable interest rates range from 1.99%-8.38% (1.99%-8.38% APR). Fixed interest rates range from 2.99%-8.63% (2.99%-8.63% APR).
IS Variable Rate Disclosure: Variable Rates advertised are based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of December 1, 2021, the one-month LIBOR rate is 0.09%. Variable interest rates will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree and presence of a co-signer. Your final variable rate may be based upon the 30-day average SOFR index, as published by the Federal Reserve Bank of New York. The maximum variable rate is the greater of 21.00% or Prime Rate plus 9.00%.
ERL Variable Rate Disclosure: Variable interest rates are based on the 30-day average Secured Overnight Financing Rate (“SOFR”) index, as published by the Federal Reserve Bank of New York. As of May 1, 2022, the 30-day average SOFR index is 0.29%. Variable interest rates will fluctuate over the term of the loan with changes in the SOFR index, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable interest rate is the greater of 21.00% or the prime rate plus 9.00%.
Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer.
Lowest Rate Disclosure: Lowest rates are only available for the most creditworthy applicants, require a 5-year repayment term, immediate repayment, a graduate or medical degree (where applicable), and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Rates are subject to additional terms and conditions, and are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer. Borrowers should carefully review federal benefits, especially if they work in public service, are in the military, are considering possible loan forgiveness options, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision on our website including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.