Abroad for good, should one pay their loans back?

Posted by FlounderAdorable7140@reddit | studentloandefaulters | View on Reddit | 19 comments

I have 30k in grad school loans (no cosigners) and have lived abroad my entire adult life. I have dual citizenship with a European country, and do not plan on ever returning to live in the US (seriously would kill myself before going back). The only thing I'm interested in maintaining regarding the US is my ability to visit and inherit (in like 35 years). If you were in my position, what would be the wise thing to do? It seems all the things they are threatening me with (no tax return, garnishing wages, fucking up credit when I have none) are irrelevant/unfeasible to do from where I sit. What is the worst they could do from abroad?

Also, as a Native American and Black person, I really can't stomach paying money to this State that literally owes my people trillions in reparations, meanwhile all these fascist politicians getting hundreds of thousands in PPP loans forgiven.

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sookie42@reddit

What about setting up income based repayments and there's the foreign income exclusion? I did that so my payment is set to 0.

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WhompWump@reddit

Do this. I know it sounds good to tell them to fuck off but you never know what the future brings and you don't want to screw yourself over.

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FlounderAdorable7140@reddit (OP)

would this mean interest still accrues though?

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Stirdaddy@reddit

Interest accrues, yes. According to the existing TOS, your loans will be forgiven in 20 or 25 years^(1) -- and that forgiveness is considered taxable income^(2). So your US taxable income for X year would be equal to the amount of forgiveness. But that's all moot anyway....

I've been playing the Foreign Earned Income Exclusion game for 15 years. I'm also neeeeeever moving back to the US. It looks like Trump is going to change the rules, so that means I'm going to just say "Bye bye" and totally ignore the loans. I guess they can send me stern emails and call my parents every day for a month, but they can't touch my money outside the US (I live permanently in Austria). Joke's on them for avoiding financial treaties. They don't want some Iraqi successfully suing George W. Bush for destroying his country.

^(1)Unfortunately, in the first "generation" of student loan forgiveness like 8 years ago, something like 98% of the loans failed forgiveness because of adminstrative errors. It was a short-lived scandal. It showed that, unsurprisingly, the system doesn't work as advertised.

^(2)If the amount of your forgiveness plus your actual working income is under the FEIE tax threshold, you still wouldn't pay any taxes on that US income. So, for example, you actually earn 50,000 euros in 2030. Your loans in the amount of $100,000 are forgiven in 2030. Therefore your total income for 2030 is \~$150,000. The FEIE in 2030 would be like $130,000. So you "actual" taxable income is $20,000 -- which is below the poverty line, which means the taxes on that would be close to zero.

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Specialist_Job9678@reddit

I don't think that forgiveness applies to private loans. That only works for federal loans.

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Stirdaddy@reddit

I've been doing this for 15 years. I'm never moving back anyway, so if/when things change under Trump, I'll just be like "Peeeace out brutha". I could care less about my US credit score.

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ThrowAwayT55@reddit

I'm really bad with keeping up with what could potential happen under trump? If we are living abroad with federal student loans that are in income based repayment....can he do something to get the individuals living abroad?

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xSciFix@reddit

Idk but as a fellow dual citizen I'm about to do the same. Inheritance can be handled via trusts and they can't bar you from entry bc you have debt (at this point anyway).

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gallc@reddit

Same situation but I did it with a lot more than 30k. It's been 7 years and I've visited the US several times with no issues. Set up ibr on federal ones and just default on private if you have them. It wouldn't surprise me if they did something with ibr at some point to make that no longer an option, but even then I still wouldn't pay them.

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Leather_Bat7344@reddit

Did they hire any international collectors to chase you down? I’m in the same situation right now and it’s a private loaner and they have my passport (the country I am leaving for) information. I got a job in that country. I’m afraid that they will try to do something and then I will lose my job. I still have 30k balance to pay off. Any advice would be appreciated!

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gallc@reddit

I got a few scary letters in a PO box that I kept in the US and my parents got some vague calls asking about me, but that was years ago. I highly highly doubt they would come after you in another country for 30k, but maybe if it's like Canada or somewhere easier they would be more likely to. I would say still worth the risk though.

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FlounderAdorable7140@reddit (OP)

thank you for this! To set up IBR would one have had to have filed taxes recently to set it up?

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Stirdaddy@reddit

Yes. IBR is based on your taxable income as listed on the IRS 1040 form each year. Each year you have to re-certify the IBR, based on the previous year's taxable income.

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Dapper-Umpire4015@reddit

Makes sense, especially given your background. If you’re abroad for good with no U.S. ties, the risk is low, but the debt won’t vanish. Just weigh the moral cost vs. long-term consequences.

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UNBANNABLE_NAME@reddit

Get your inheritance into someone elses name who you trust and is on board with your decision. Have them back door you the money to a foreign bank directly. See if you can get it transferred directly into a foreign bank retirement account from them that wont tax it right away.

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FlounderAdorable7140@reddit (OP)

It's already in a trust. In my understanding that's not reachable by the government right?

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