Keep a Stateside Banking Presence

Moving to a different country can present some challenges, especially when it comes to managing your student loans. One of the first steps you should take is to maintain a U.S. bank account. Many federal student loan servicers require payments to be made from a U.S. bank account or with U.S.-based funds. Keeping your stateside bank account ensures you can continue making payments without any interruptions.

Ensure your account is funded with enough cash to cover your student loan payments and other necessary transactions. You can achieve this by setting up regular wire transfers or using an online money transfer service. Be mindful of the fees associated with international wire transfers and money transfer services, as these can add to your costs.

Set Up Autopay

To simplify the process of staying up to date on your payments, consider setting up automatic payments from your U.S. bank account. Autopay ensures that you don’t have to remember to make manual payments each month, and it helps avoid delays in receiving paper bills.

Many student loan servicers and private lenders offer a discount on your interest rate if you enroll in autopay. You can set up autopay through your online account, but make sure to maintain a buffer in your checking account to avoid returned payments due to insufficient funds.

Update Your Contact Information

It’s crucial to keep your student loan servicer updated with your current contact information. This includes your address, phone number, and email address. By doing so, you ensure that you receive important communications about your account that could affect your payments.

If you prefer, you can request to receive all communications online. Just make sure to keep your email address updated to receive notifications when new communications are available.

Update Your Repayment Plan

Federal student loan borrowers have access to several payment relief options, including income-driven repayment (IDR) plans. If you plan to live abroad for an extended period, the foreign-earned income exclusion can help you maximize the benefits of an IDR plan.

The IRS allows you to exclude foreign earnings from your gross income when filing a U.S. tax return. For 2024, the maximum amount you can exclude is $126,500, though this figure adjusts annually with inflation. When you apply for an IDR plan, your student loan servicer will use your adjusted gross income from your tax return, which won’t include your excluded foreign earnings. Depending on your remaining income, your monthly payment could be as low as $0, and you may qualify for debt forgiveness in the future.

Keep in mind that interest will continue to accrue, even if your payment isn’t enough to cover it. Some IDR plans will add your unpaid interest to your balance, which could cause problems if you return to the U.S. and can no longer rely on the foreign-earned income exclusion. To avoid a ballooning balance, consider applying for the SAVE plan, which doesn’t capitalize unpaid interest.

Resist the Temptation to Stop Making Payments

Some student loan borrowers move abroad to escape their student loans, but it’s important to remember that your debt won’t disappear. The federal government offers more leniency than private lenders when it comes to missed payments and default. Generally, your loan servicer won’t report a late payment to the credit bureaus until it’s 90 days past due, and you won’t be considered in default until you’ve gone roughly nine months without making a payment.

If your loans are in default, the government can garnish your wages and bank account, withhold tax refunds and government benefits, and pursue other actions to collect what you owe. Additionally, if you plan to return to the U.S., missing payments and defaulting could negatively impact your credit, making it difficult to obtain affordable credit when you need it.

The Bottom Line

Whether you’re planning to move abroad or already have expat status, it’s essential to manage your student loans responsibly, even if you don’t plan to return to the U.S. in the future. While you’re at it, it’s also a good idea to monitor your credit regularly to keep an eye out for fraud and other potential issues that could negatively affect your credit score.

At O1ne Mortgage, we understand the complexities of managing finances while living abroad. If you need assistance with your mortgage or any other financial services, don’t hesitate to call us at 213-732-3074. Our team of experts is here to help you navigate your financial journey with ease.