Do You Still Have to Pay Student Loans If You Move Abroad?

• Your student loans don’t disappear just because you move abroad. Federal loans remain enforceable, and private lenders may still pursue collection depending on your situation.

• You can move abroad with student loans. Using income-driven repayment plans and the Foreign Earned Income Exclusion, you could reduce payments to $0.

• If you stop paying your student loans after leaving the country, you could face serious consequences, like tax refund offsets or wage garnishment if you work for a U.S.-based employer.

Do you still have to pay student loans if you move abroad? Short answer: yes. Your student loans don’t vanish just because you’re living in another country.

More U.S. borrowers—some of my clients included—are packing up and moving to places like Portugal, Mexico, and Australia. They’re chasing affordable cost of living, better health care, and a fresh start. For some, student loans delayed the move for years. For others, they made the leap but ignored their loans, only to circle back after hearing about forgiveness programs under the Biden administration.

Here’s the thing: living abroad doesn’t erase your loans, but there’s a little-known workaround that can help. Ahead, I’ll break down what you need to know about managing student loan debt from overseas.

Let’s start with the most common question I get:

Yes, you can—whether your loans are federal or private. Moving abroad doesn’t cancel what you owe, but it doesn’t mean you’re stuck either. Plenty of borrowers are making the leap and finding ways to manage their loans from a different country.

That said, living abroad adds a layer of complexity. What happens to your loans once you’re no longer in the U.S.?

Let’s break it down.

Moving abroad doesn’t cancel your student loans, but the way you manage them may change. Federal loans remain under the Department of Education’s jurisdiction, and private loans still fall under the terms of your agreement. But living overseas can introduce logistical and financial challenges that require strategic planning.

For example, if your loan servicer doesn’t accept foreign bank transfers, you may need to set up a U.S.-based bank account or use services like Wise to move funds internationally.

Another challenge is understanding how exchange rates can impact the actual amount you’re paying, potentially making your loan payments more expensive depending on currency fluctuations.

 

Stop paying your federal student loans while living overseas, and they’ll go into default. The government won’t forget about them—and neither should you.

Here’s the deal:

• The federal government can still take your Social Security benefits and tax refunds, even if you’re abroad.

• If you work for a U.S.-based company, they can garnish your wages.

• Your passport? Safe. Student loan debt won’t revoke your passport or stop you from getting a new one.

• Extradition? Not happening. This isn’t a criminal issue; it’s a civil one.

That said, the government will use every legal tool it has to get its money. They can’t touch your VA disability payments, 401(k), pension, or the cash in your bank account. But they’ll still come after anything they can legally grab—no court order needed.

Related: What Happens If You Default On Student Loans?

Why? Because lawmakers gave the Department of Education administrative wage garnishment and collection powers.

Private loans are a different story.

Private lenders have fewer ways to pursue you outside the U.S. Here’s why:

• They can’t garnish your wages without a U.S. court order.

• Serving you legal papers in a foreign country is difficult and expensive.

Because of this, some borrowers consider defaulting on their private loans and waiting out the statute of limitations — the legal deadline for suing you over the debt.

But here’s the catch: it’s risky.

• In some states, the clock stops if you’re living abroad.

• In others, it keeps running.

• And in rare cases, like one I saw in Texas, courts may treat each missed payment as a separate debt with its own statute of limitations.

For example, in my client’s case, they’d returned to the U.S. thinking the statute of limitations had expired. But the creditor argued that while payments 1-80 were time-barred, payments 81-120 weren’t yet due when the borrower left the country. That left them vulnerable to a lawsuit upon their return.

While these cases can be fought in court, they underscore the importance of understanding the rules in your state—and factoring in the risks of returning to the U.S. after a strategic default.

Related: What Happens If You Can’t Pay Private Student Loans?

You can pay your federal and private student loans while living overseas—if you have a U.S.-based bank account. The real challenge? Getting paid in local currency. That’s where currency transfer fees can mess you up.

Here’s how many expats manage it:

• Banking: A lot of my clients swear by the Charles Schwab High Yield Investor Checking account. Why? It reimburses worldwide ATM fees, and the Schwab Visa works at international ATMs. Plus, it’s U.S.-based, so you can use it to pay your student loans directly.

• Currency Transfers: If your paycheck is in another currency, services like Wise are game-changers. They let you set up reminders to transfer money in bulk when the exchange rate is in your favor.

Income-driven repayment plans calculate your monthly student loan payments based on your income. Think of IDR plans like categories of citrus: limes, grapefruits, oranges. Inside the IDR category, you’ll find subcategories like SAVE, PAYE, and IBR.

For many expats, the specific plan doesn’t matter. If your income qualifies for the Foreign Earned Income Exclusion and you stay under the $126,500 cap, your payment could drop to $0 on any of these plans.

The one big exception? The SAVE plan.

It’s the only plan that stops unpaid interest from growing when your payment is $0—a critical advantage for borrowers worried about future tax consequences.

But here’s the catch: the SAVE plan is under heavy legal fire, and if it’s struck down, it’s unlikely the incoming Trump administration will work to restore it.

Here’s how the FEIE works and why it’s such a powerful tool:

• FEIE Can Lower Payments to $0: The FEIE allows you to exclude up to $126,500 of earned income from your taxable income in 2024 on your federal income tax return. “Earned income” means wages, salaries, or self-employment income you make while living and working abroad—it doesn’t matter if the income comes from a U.S. or foreign source. With your Adjusted Gross Income (AGI) effectively reduced to $0, your IDR payment could also drop to $0.

• Interest Accrual Still Applies (Unless on SAVE): A $0 payment under most IDR plans doesn’t stop your loans from accruing interest. Over time, this can lead to a growing balance. If you’re on the SAVE plan, unpaid interest is waived, preventing the debt from ballooning. This makes SAVE the ideal plan for those qualifying for $0 payments, but its legal future is uncertain.

• $0 Payments Still Count Toward Forgiveness: Even if you’re paying nothing each month, those $0 payments count toward the 20- or 25-year forgiveness clock. It’s like playing the game and racking up points without making a move.

Example Scenario

Let’s say you earn $100,000 while living and working in Portugal. The FEIE excludes this income from your taxes, bringing your AGI to $0. With no taxable income, your IDR payment could be $0—even if you owe six figures in loans.

On the flip side, if you also have $15,000 in passive income from investments or rental properties, that income will count toward your AGI and raise your IDR payment.

Note: Congress has considered eliminating or altering the FEIE. While no changes have passed yet, it’s worth staying informed about any updates that could affect this strategy.

Borrowers on income-based repayment plans like ICR and PAYE often focus on loan forgiveness after 20-25 years. But there’s a catch: the forgiven amount is typically taxed as income, creating what’s commonly called a “tax bomb.”

Here’s how it works:

If $100,000 student loan balance is forgiven, the IRS may treat that as if you earned $100,000 that year. Depending on your tax bracket, your bill could hit tens of thousands of dollars. For retirees or expats living on limited income, this can feel catastrophic.

Right now, the American Rescue Plan Act has made all forms of student loan forgiveness tax-free at the federal level—but only until 2025.

What happens after that? Nobody knows.

If you’re worried about this looming question, here are some strategies to consider:

• Create Your Own Insurance Policy: One of my clients took the money they would’ve paid toward their loans and invested it in a mutual fund with a steady return. Over time, that fund became their safety net for any potential tax bomb. It’s a proactive way to prepare for the unknown.

• Insolvency Exclusion: If you plan to make a permanent home overseas, the insolvency exclusion could work in your favor. At the time of forgiveness, the IRS assesses your assets and liabilities. If your liabilities outweigh your assets—meaning you’re insolvent—the tax on the forgiven amount may be wiped out entirely. Keeping most of your assets denominated in your new country can help maximize this exclusion.

• Use the FEIE Strategically: If you’re still living abroad when your loans are forgiven, the FEIE might help reduce the tax liability on the forgiven amount. This isn’t a guarantee, but it’s worth factoring into your long-term plans.

• Consider Citizenship Status: For some expats, repatriating or giving up U.S. citizenship is part of their broader financial strategy. To be clear, this won’t erase your student loan debt, but it could eliminate the need to pay taxes on forgiven amounts. It’s not a decision to take lightly, but it’s something to think about and talk with a qualified tax professional both in the US and abroad to get their advice.

Some borrowers feel conflicted about using strategies like the FEIE or IDR plans to lower their monthly payments, worrying it might feel like “getting away with something.” Others see the system as deeply predatory—even exploitative—and feel little obligation to repay beyond what the law requires.

No matter how you feel about it—or how others might judge your approach—the truth is this: you’re not doing anything wrong by taking advantage of the FEIE.

Congress designed these tools to make repayment manageable—even for people living abroad. It’s not unethical—it’s practical.

Yes, there are risks, like system changes or future tax implications, and the fear of “doing it wrong” can feel overwhelming.

But you didn’t create this system—you’re simply working within it.

Focus on your goals, stay informed, and approach your loans with confidence that you’re making smart, legal decisions for your future.

Moving abroad doesn’t mean leaving your student loans behind—but with the right planning, you can handle your debt while enjoying life overseas. From understanding student loan repayment options to sorting through tax implications, solutions exist to help you stay in control.

We’ve helped borrowers manage their loans from all corners of the world—China, New Zealand, the UK, Morocco, and beyond. Whether you’re looking to lower your payment amount, protect your retirement income, or explore forgiveness options, a personalized strategy can make all the difference.

Book a call with one of our student loan experts.