If you’re one of the 45 million Americans with student loans, you might be looking for an out-of-the-box solution to your debt. Here’s one: Try moving someplace new to help pay off your student loans faster.
Of course, if you love where you live, don’t let your student loans drive you away. But if you’re interested in relocating anyway, moving could be a savvy choice for your finances.
From lowering your cost of living to qualifying for student loan assistance, here are four surprising ways moving could help you conquer your student debt.
1. You could seriously lower your cost of living
A number of factors affect how much you spend each month, from your lifestyle to your recurring bills. And one such major influence is where you live.
Consider the cost-of-living difference between New York City and Austin, Texas, for example. Both are cool cities with lots to do, but consumer prices, including rent, in Austin are nearly 40% lower than in New York. Choosing to live in Austin instead could create a ton of room in your budget.
Moving could also save you a lot in rent each month. According to ApartmentList, San Francisco, New York City and Boston have some of the highest rent prices in the country. The median costs of a one-bedroom apartment are $2,459, $2,118, and $1,687, respectively.
But if you packed your bags and moved to Memphis, Tenn., you’d face a median rent of just $700 for a one-bedroom. In Chicago, that number rises to $1,076, and in Miami it’s $1,082. Changing cities could easily cut your monthly rent in half.
This strategy of reducing rent is what helped Logan Allec, now a Certified Public Accountant, pay off more than $35,000 in student loans. Allec also owns and runs the personal finance site Money Done Right,
“For a few months out of college, I rented out a room in a nice area for nearly $1,000 per month,” said Allec. “[Then] an opportunity arose for me to share a room in a house.”
His rent decreased from $1,000 down to $275, allowing Allec to put hundreds of extra dollars toward his student loans each month and pay them off years early.
Of course, lowering your cost of living won’t save you money if you’re limiting your job prospects. You still need to make sure you have employment opportunities and can reach your income goals.
But if you choose a destination with a solid, well-paying labor market — or perhaps get a job that lets you work from anywhere — you could transform your cost of living. And with all that money you’re saving each month, you could throw additional payments at your student loans and be out of debt years ahead of schedule.
2. You could save thousands in a state with no income tax
Outside of reducing your living expenses, moving could also save you money on taxes. In the U.S., there are seven states that don’t charge state income tax:
- South Dakota
Similarly, New Hampshire and Tennessee don’t tax wages, though they do tax interest and dividends. According to a Student Loan Hero study, eliminating state income tax could potentially save the average borrower $1,977 per year.
If you used those savings to pay off your student loans, you’d chip away at your debt faster — and save even more money on interest. Note, however, some of these states have higher-than-average sales or property taxes that could offset some of the gains, so make sure you look into this before making any big decisions.
Changing states isn’t the only way to save on taxes, either. Chartered Financial Analyst and financial wellness expert Anna Yen chose to save money on taxes by moving to Hong Kong after graduating from the University of Pennsylvania.
“I chose to move out of the U.S. to Hong Kong three years out of graduation for higher income and to gain expat tax breaks,” said Yen. “The Foreign Earned Income Exclusion eliminates federal tax for the first $90,000 of income. This also eliminated state and city taxes, which I was originally paying in New York, some of the highest in the country.”
Thanks to her savings, Yen paid off $15,000 in student loans less than five years after graduating. If you’d like to move abroad, you might need to work for a foreign employer who can sponsor you for a visa. Or if you work online, you could adopt a digital nomad lifestyle, moving between countries when your visitor visa expires.
3. You could reduce your bills to $0 by leaving the country
If you’re interested in leaving the country like Yen did, there is another way to use your wanderlust to conquer student loans.
This approach works a little differently than the previous one, since it doesn’t involve you making extra payments on your loans. Instead, you could put your loans on an income-driven repayment plan, which would adjust your payments according to your income.
When making this calculation, the government looks at your tax returns and your Adjusted Gross Income (AGI). But if you’re living abroad, you can take advantage of the Foreign Earned Income Exclusion, which as Yen notes above, could exclude much of your income from taxes (as long as you meet eligibility requirements). Because of this tax perk, your AGI could be $0.
As a result, your payments on an income-driven plan could also be $0; you could pay nothing each month without running the risk of going into default. After 20 or 25 years, your entire loan balance could be forgiven. Your loans could be wiped away; you’d just be responsible for paying taxes on the forgiven amount.
This strategy really only works for expats who plan to live and work out of the country for two decades or more. If you return to the U.S., you’ll be facing a larger balance than when you started. It also only applies to federal student loans — private loans aren’t eligible.
Also be aware that there’s no guarantee that income-driven repayment plans won’t change or be eliminated in the future. So while this option is somewhat risky and probably not that common, it’s worth knowing about for anyone looking to live abroad long-term.
4. You could become eligible for student loan repayment assistance
Depending on where you live, along with some other criteria, you could be eligible for student loan repayment assistance from your state. Several states have student loan repayment assistance programs (LRAPs) for residents who work in certain fields.
If you’re a pharmacist in Arizona, for instance, you could earn up to $105,000 in loan assistance from the Arizona State Loan Repayment Program. STEM professionals who live and work in Maine could get up to $60,000 from the Alfond Leaders Program. Some jobs that commonly qualify for state-run LRAPs include lawyers, teachers, doctors, nurses, pharmacists, dentists and other healthcare professionals.
But you don’t necessarily need to work in a certain profession to get loan assistance. Kansas, for instance, offers up to $15,000 in loan assistance for five years to anyone who establishes residency in one of its rural opportunity zones. And Hamilton, Ohio, a city of about 62,000 residents, will provide up to $5,000 over 25 months to new residents through its Talent Attraction Program (TAP) Scholarship.
Most recently, programs from Vermont and Tulsa, Oklahoma, offer financial incentives to remote professionals willing to move and work there for at least a year. Both programs offer up to $10,000 in stipends, coworking space memberships and other perks to online workers.
Although this money isn’t specifically designated for student loans, you could choose to put it toward your debt. If you’re drowning in student loan debt, moving to a state that offers financial assistance could mean a lifeboat. Check out our database of LRAP opportunities for more information.
Get creative about crushing your student loan debt
No one enjoys the feeling of having student loans hanging over their head. Debt can become especially burdensome if it’s eating up a big portion of your paycheck every month and standing in the way of your other goals.
So it could be time to come up with creative solutions for getting rid of your student loans. Moving to a state with a lower cost of living or no income tax, for instance, could be the game changer you need to take back control of your finances.
Or you might take a page out of these borrowers’ books and start a side hustle to make extra payments on your student loans. One home baker, for example, earns over $1,000 per month with her fidget spinner cookies, for instance, and a PR professional teaches group fitness classes on the side to pay off his debt.
By thinking outside the box when it comes to making or saving money, you could change your financial situation and crush those student loans once and for all.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
2 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 2.54% APR (with Auto Pay) to 7.27% 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 March 18, 2019, 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 0318/2019. 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.
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3 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.
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 2.5% effective February 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.54% – 7.12%3||Undergrad & Graduate|
|2.54% – 7.27%1||Undergrad & Graduate|
|2.67% – 8.96%4||Undergrad & Graduate|
|3.23% – 6.65%2||Undergrad & Graduate|
|2.69% – 7.43%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|