Living outside the U.S. can be an amazing experience, but it presents its own challenges when it comes to student loan repayment. Before you pack your bags, you need to have a plan in place.
As long as you’re prepared, your loans don’t have to stand in the way of your travel dreams. You can live abroad and still stay up to date on your student loan bills.
Here’s what you need to do with your student loans before getting your passport stamped.
1. Set up autopay on your student loans
The best way to ensure you don’t miss a student loan payment is to set up automatic payments. You can typically set autopay up online by signing into your account on your loan servicer’s website.
Some loan servicers even offer a 0.25% interest rate deduction for setting up autopay. You’ll just provide your account and routing number, along with the name of your bank.
Every month, the loan servicer will withdraw money to cover your student loan bill. And you won’t have to worry about sending a check overseas or missing a due date.
2. Connect an international bank account to your home account
Besides setting up autopay, you also need to ensure you have the funds to cover your student loan payments. If you’re making money abroad, you might be using an international bank instead of your home bank.
Some banks, such as Chase and CitiBank, have locations all over the world. But others are limited to the U.S. and charge substantial fees for foreign transactions. To avoid withdrawal fees and access your funds abroad, you might want to set up a new account with an international or global bank.
After you’ve set up autopay, your student loan servicers will still withdraw from your home account. So make sure to link your new international account with your home bank. Check that your U.S. bank account accepts electronic transfers in foreign currency from foreign banks.
Set up automatic transfers once a month to your U.S. account to cover student loan payments. And since the process may take some time to figure out, put a cushion of savings in your U.S. account. That way, you won’t run the risk of missing a student loan payment while you set up cash flow back home.
3. Consider refinancing your student loans
If you have multiple student loans, it could be helpful to refinance with a private lender. Refinancing combines your various loans into one new loan. You can choose a different repayment term and may score a lower interest rate, too.
With a lower interest rate, you could save thousands of dollars on your student loans. You could choose a shorter repayment term to get out of debt fast. Or you could extend your term, so you don’t have to funnel as much money to your student loan payments each month.
Keep in mind that when you refinance federal student loans, you lose access to federal repayment and forgiveness programs. If you think you’ll need an income-driven plan as an expat or after you return home, refinancing isn’t the best option for you.
If you have a steady income and solid credit, refinancing could be a good option. Be sure to research several lenders, though. Some refinancing companies, such as CommonBond and Citizens Bank, don’t work with borrowers who are living in another country.
They require U.S. residency to apply, so you’ll need to provide a U.S. address. And Citizens Bank also needs to see income from a U.S. company or organization.
Other lenders, such as SoFi, Laurel Road, and LendKey, will work with you if you’re already abroad. Laurel Road allows you to apply with a foreign address and international income. And SoFi will help you verify foreign-earned income as long as you can provide a permanent address in the U.S.
LendKey will also accept proof of employment abroad as long as you’re still paying taxes in the U.S. If you’re interested in refinancing and already living internationally, speak with a lender about your plan of action.
And if you haven’t left yet, it could be easier to start the process before you fly off to your new destination.
4. Consider federal loan consolidation
Besides refinancing, federal student loan consolidation could also be a smart financial move before you relocate. This type of consolidation applies only to federal student loans. It combines your federal loans into one new loan.
Your new interest rate will be the weighted average rate of all your loans rounded up to the nearest one-eighth of a percent. Even though federal loan consolidation doesn’t lower your interest rate, it does simplify your monthly payments.
So instead of having to track multiple loans, interest rates, and servicers while you’re living abroad, you only have to deal with one. Handling your payments from another country can be confusing enough. This type of consolidation could be just the money move you need to make things less overwhelming.
5. Learn about income-driven repayment options
If you’re struggling to make monthly payments, you could qualify for an income-driven repayment plan. These plans extend your student loan repayment terms to 20 or 25 years and lower your monthly payment in the process.
And if you’re making money in a foreign currency, an income-driven plan could substantially lower your monthly bills. That’s because an income-driven plan typically reduces your monthly payments based on your adjusted gross income (AGI). Your AGI is the amount of income you report that’s subject to income tax.
But if you’re making money abroad, your AGI could be close to zero. According to the IRS, U.S. citizens living internationally could be eligible for the “foreign earned income exclusion.” This allows you to exclude income earned abroad from being taxed in the U.S.
As a result, your payments on an income-driven plan while living abroad could be extremely low. Before you get too excited, though, remember that low payments mean you’re barely scratching the surface of the principal or interest.
You could end up with a mountain of interest from all those months of low payments. Of course, the remaining balance could get forgiven — but that will take 20 or 25 years, depending on your plan.
Before switching to an income-driven repayment plan, make sure you’re aware of all the implications and speak with a student loan lawyer or your loan servicer.
6. Avoid going into default on your student loans
When you move abroad, it’s easy to get caught up in a whirlwind of adventure. You’re busy adjusting to a new culture and setting up a new home. With everything else going on in your life, you may be tempted to forget about your student loans.
But you can’t escape student loan debt by moving overseas, and defaulting on your loan payments has long-term consequences that are difficult to shake off.
For one, defaulting can completely tank your credit score. A poor credit score makes it difficult to buy a home or take out another loan in the future.
Plus, the government can garnish your wages and even your Social Security benefits. If and when you move back to the U.S., you could face severe financial setbacks.
If your student loans are a huge burden, take steps to refinance or get on an income-driven repayment plan before you leave. By lowering your monthly payments and setting up automatic payments, you’ll stay on top of your bills without having to stress about them.
As long as you take proactive steps before you move, you won’t have to worry much about your student loans while you’re away. You can enjoy a life of travel while secure in the knowledge you’ve taken care of your student loan responsibilities.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
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 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% 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 firstname.lastname@example.org, 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
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
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.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|