Written By Travis Hornsby, CFA®, CFP®
Thinking of moving overseas to avoid student loans? You're not alone. We have many clients in New Zealand, Australia, Europe, the Middle East and Asia who are legally paying $0 a month on their federal student loans. They’re not committing tax fraud or in default, and they’re going to have a huge amount of debt forgiven if they continue with their strategy.
Their stories are all different. Some left the U.S. after marrying husbands or wives from another country while traveling or studying abroad. Others thought the international move would be temporary, but then these folks adopted a permanent expat lifestyle, due to a lower cost of living.
You don't have to flee the country or escape to get away from student loans. Some student loan borrowers use forbearance for years until loan servicers start getting creative with collection methods. Others send random statements from international employers showing paystubs. The shrewdest hire a CPA to file their U.S. taxes showing Adjusted Gross Income (AGI) of $0.
Having an AGI of $0 and having your federal loans on an income-driven repayment plan (IDR) like Pay As You Earn (PAYE) can effectively mean paying nothing on your student loans.
On various Reddit channels and Facebook groups, you can find people talking about this little-known hack. Read on to learn why moving overseas to avoid student loans can be beneficial.
Why Living Abroad is so Good for Your Student Loans
The biggest hack you probably don’t know about your student loans is something called the Foreign Earned Income Tax Exclusion. You can exclude over $100,000 of income earned abroad from your tax return as a U.S. citizen.
For 2023, you can exclude up to $120,000. This amount is adjusted annually for inflation.
If you’re worried about your student debt to the point where you want to flee to a new country, there’s a good chance you’d make less than this amount. If you made more than the exemption, you could exclude that hundred grand from whatever you make.
Let’s look at the case of an American-born veterinarian who is on the hook for $250,000 of student debt. She meets an Australian and they go live in Melbourne, Australia. She decides to stay there and work as a vet in Australia, making about $70,000 USD.
Those earnings would be exempt from U.S. taxation. She would have an AGI of $0. Under IDR, that $0 income would equate to $0 payments. This allows her to pay nothing while staying in good standing with her loans.
You don't have to opt for deferment, tank your credit score, or fall into default.
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How to get a low student loan payment living internationally
You must certify that your income hasn’t changed on the income-based certification form. That’s true if you’re exempt from U.S. taxation, because $0 AGI is not different year to year if you earn less than the allowed limit.
Moving abroad to avoid student loans is possible
So, if your gross annual income abroad is less than six figures, you generally don't have to make payments on unpaid student loan debts, thanks to this hack.
Then, you submit your tax return electronically to your loan servicer that your income from last year was $0. This will result in a student loan payment of $0 a month.
This strategy works well for federal loan borrowers who opt for income-driven repayment. Unfortunately, borrowers with private student loans with private lenders don't get to take advantage of this loophole. Therefore, if you refinance your federal debt with a private student loans company at any point, you won't have access to this repayment hack.
Student Loan Forgiveness When Living in a Different Country
You can visit the U.S. using this strategy as much as you want, without worrying that customs agents will arrest you. I get this question all the time, as if the government is going to want to put you in jail for paying nothing on your student debt because you live abroad.
Not only will they not arrest you, but also you don’t have anything to worry about.
You follow the extremely flawed student loan repayment rules, and if this results in a payment of $0, that’s not your fault. It’s the fault of the Congresspeople who put the flawed rules for these repayment plans into place.
Of course, a $0 monthly payment will cause the loan balance to grow a lot over time.
In 20 to 25 years, you will owe taxes on the forgiven balance, which could be from all the growing interest payments over the extended loan term. Or will you?
Declaring insolvency to get out of the student loan “tax bomb”
If you decide to make your permanent home overseas, you could keep most of your assets denominated in the foreign country where you live.
At the end of the loan forgiveness period, the IRS is supposed to assess your assets and liabilities. If the result is negative, they would likely wipe the taxes owed on your student debt. This is called the insolvency exclusion.
If you wanted to prepare for the compound interest and subsequent tax bomb, just in case, you could just put away a few hundred a month in an investment account to have enough for the tax bomb.
Best Countries for Americans with a Lot of Student Loan Debt to Live In
I know from a cousin of mine that New Zealand welcomes young Americans who are single.
It seems like a large number of Americans I know who are pursuing the “flee the country” strategy for their student debt live in Australia.
I’ve had some clients in the UK and the EU, though you seem to need a spouse to gain permanent resident status in a lot of those kinds of countries.
I haven’t seen as many people utilizing this strategy in Asia and the Middle East, permanently. Still, they have utilized the foreign earned income exclusion to pay $0 while living there.
If You’re Married to a Foreigner and You Owe Student Debt, It’s Okay to Move
Recently, I met with a client who had married a Scottish woman. He thought the only way to handle his massive debt from professional school was to return from where he got his degree in the UK back to the Pacific Northwest.
Their whole family support structure was in the UK. They had a small child, and his wife was unhappy.
He struggled to make even $1,000 monthly payments on his massive loan repayments.
He made the mistake of sending his loan servicers a letter from his international employer, instead of his tax returns. Hence, he thought he had to pay a large amount overseas on his student loans.
After I explained the pay strategy for American expats, he realized he could sell his house in Seattle, ditch his mortgage and move back to the UK, without worrying about his student loans' principal balance.
Moving Overseas to Avoid Student Loans Isn't Your Only Option
While I wanted to show you how cool this loophole is, moving overseas to avoid student loans isn't your only option.
I have yet to see a situation, in over 11,000 clients, where we’ve made a plan that didn't allow for him or her to achieve the life that he or she wants while also handling student debt and balancing personal finances.
Of course, if you do happen to meet “the one” and they’ve got a foreign passport, get ready to have some extra spending money on a faraway beach somewhere.
Thinking about fleeing the country because of student loans? Do any of these places cross your mind?
Not sure what to do with your student loans?
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Second time defaulting on student loans so cant get rehabilitated or consolidated. Any advice?
To be honest, you need to overcome whatever is keeping you from being able to make income driven payments. They should always be affordable based on your income. Build an emergency fund too so this doesn’t happen again. You’ll want to call the default resolution group at the Dept of Education at 800-621-3115. Also assuming you used up all your forbearance? If you haven’t, you should use that to build savings probably so you can confidently make your monthly payments.
Thank you Travis for this article! I’m Canadia and my wife is american, and as fate would have it I’m a financial aid advisor here in the US at a major public university. My wife has substantial student loans, and and I have told her, and my students, of this loop hole for years! Many of my students have dual citizenship or PR in other countries. My wife can make her income driven repayments but I have always told her, if they get to be too burdensome, we can just move to Canada, she can remain on income her income repayment and pay 0 a month. It should also be mentioned that the 20-25 year forgiveness is not automatic, you generally have to apply, so to avoid the tax bomb you can just avoid forgiveness.
If I am an Au Pair in a foreign country when my repayment period begins (as it is 6 months after graduating) does that leave me with a $0 AGI from that start time for the next year?
This stuff confuses the sh*t out of me…
I would file your taxes and use that tax return from the year prior to show your 0 dollar income. Then each year you’re overseas you could show 0 income and get a 0 a month payment legally.
In practice, do private US student loan companies (and/or collection agencies they sell loans to) pursue court cases abroad to try and enforce US judgments and collect foreign assets?
Good question. It probably depends if you have a lot of US assets and owe them a lot of money they probably theyd try. If you owe 20k they probably would view it as too expensive. I know in settling w folks some private companies thing about the cost of a lawsuit vs the potential recovery value
At what amount (ex. $80k) would a private student loan company in the US take action against someone living abroad?
Can’t say for sure. But I think US citizenship is a very valuable asset so I wouldn’t trash my credit over a small amount of money.
Hi, I have a huge government student loan which haven’t paid anything yet. I have been living abroad mostly since I graduated because I couldn’t find a professional job in USA and gave a birth to my daughter The same year. I haven’t done previous two years tax returns but this year I come in USA for few months and did my tax. I heard that loan collectors send mail to my ex husband and he seems like send it back. I am so terrified and don’t have enough to pay student loan.. so scared to call them. This year I got tax refund but haven’t gotten yet probably loan collectors grabbed it.. don’t know. Now I work 4 days and make less than 2500 month – hardly pays my rent – now I am worried loan collectors garnish my wage or collect whatever I have in bank account saving for my daughter’s schooling. Now I am planning go back to abroad because I can’t get a car or find good job here.. really don’t know what to do? Please help me
You’ll want to call the default resolution group at the Dept of Education. Their number is 800-621-3115. Compare consolidation to rehabilitation. This is only for federal loans. Also when you’re abroad always file your taxes because you probably owe 0 and can use that income w the loan folks. Why wreck your credit when you can pay 0 a month legally right?
[…] More on “How to Flee the Country”…because of student loans […]
Very interesting. Then I move to another country and continue to make my income tax return in USA each year with income $ 0 and I can be forgiven after 25 years?
Thank You
Yes but you have to pay income taxes on the forgiven balance under the existing rules
Forgiveness vs. Discharge
Federal student loans offer a variety of means to eliminate your remaining balance, which is one of the many reasons the Student Loan Ranger recommends them over private student loans. The Public Service Loan Forgiveness program, for instance, gets a lot of positive media coverage for forgiving the remaining balances of nonprofit and public service employees after 10 years.
But federal student loans can be discharged if borrowers suffer unfortunate personal circumstances or when schools improperly handle the loans.
The major difference between forgiveness and discharge is the amount forgiven under federal forgiveness programs like PSLF is considered tax-free. That means you won’t have to claim the forgiven amount as taxable income on your federal tax returns. But this isn’t the case with discharge programs.
Thanks for the answer. Even if I continue to live abroad without having any US income, will I still have to pay taxes on forgiven income? one other question: If I work at a non-profit institution duly documented outside the country can I still qualify for loss after 10 years of service since I am paying my federal loans based on my income outside the country?
Hello,
Thank you for providing this information.
I have permanently moved from the US about 10 years ago but still pay off my student loans (havent had a late payment in 8 years). The issue is that interest rate keeps raising and I would like to explore opportunities to refinance my loans.
I have tried few lenders but considering I dont have US citizenship/permanent residency, my options are very limited.
Would be able to recommend a lender that might be willing to assist me?
Thanks
Kiril
You’re going to need a cosigner but you could try prodigy finance, i know they do some work for folks abroad
Hello:
I’m in need of help for advice regarding Dept. of Ed/Navient, my student loan in Forgiveness status. I have to reapply by the end of April. I have always been low income, as I have had health problems and limited on being able to work, but not an official/legal disability status.
In the Fall of 2017, I visited my future husband in England. We became engaged during my visit, and shortly after that I became very ill from a bacterial infection which 6 weeks later resulted in pneumonia, a partially collapsed left lung with a huge cavity and large mass, from which I almost died, and couldn’t return to the USA until the specialists cleared me to fly just short of my 6 mos. passport expiring.
Because I couldn’t return home for such a long time, I lost my part-time Home-Care job in the US, nor could I make any income as I was still recovering with my lung.
Last summer, my fiancé flew to where I lived in the US, and we got married.
I know I have to report my married status to the DOEd/ Navient when I reapply for Forgiveness status by the end of this month in April 2019. However, my husband is a retired UK citizen with a limited pension he receives each month, but has a substantial investment savings that has to last our lives, plus he has to retain and prove a certain amount as my sponsor over the next 5 years to the Home Office in England so that I can become a permanent resident.
How do I address my situation with the Dept. of Ed/Navient that I have zero reportable income, but also I am not (legally?) attached to my husband’s UK pension or investments?
What should I do, and say to DOE/Navient?
Can you please advise me on how to appropriately handle this? I am in debt as I’ve also had to supplement/support myself with credit cards in order to live for several years, and can not afford payments, so if DOE/Navient tries to attach his pension or investment savings to me, it will harm not just myself financially, but can ruin my status to remain here in the UK along with ruining my husband’s retirement pension. I have a debt consolidation atty, who advised I find out the answer from an Expat Tax Attorney before contacting DOE/Navient.
Any help you can give me is much appreciated. Thank you!
If youre planning on staying in the UK a s your husband is not a US citizen then I would file single and use the FEIE to claim 0 agi then use that return to justify a 0 payment. If you could get UK citizenship long term that might make the most financial sense to stay there. After all they cover healthcare too
Thanks, Travis.
I’m still confused. Are you saying to file an FEIE even though I haven’t worked in a year and a half due to my illness and health issues?
Is this just to prove I have no earned/taxable income?
Also, my UK husband is retired and he doesn’t work either, and his U.K. pension falls beneath the taxable threshold in the U.K.
I think the proper form for Navient I have to reapply for is the Income Based Repayment (IBR) plan to still remain on Forgiveness plan.
I’m still not sure how to fill this form out properly as it refers to spouse as if the person is American as there is no adequate category of where my husband fits into. For example, one option says: ‘By Checking “no” and signing this form means your spouse is certifying that he/she has no taxable income or is not required to file a federal tax return based on the amount of his/her taxable income.’
What this form states is that untaxable income is the following:
‘Supplemental Security Income, child support, or federal or state public assistance.’
None of which is applicable (unless UK’s pension would be considered/same as American Supplemental Security Income??)
They would then require my husband to sign, which I don’t want to put him in the position of doing.
There is nothing that I can see on the IBR plan form about filing separately.
So, all this is why I’m asking if the FEIE would fit my situation. Or, is there anything else I should know?
I need to reapply and submit the IBR plan and any other forms by April 30th.
Thank you again for your time and help.
Hi there,
I live in the UK and and have been diligently paying off my student loans for 6 years. I have accrued $271,000 in debt thanks to 8% interest on on undergrad and graduate loans. Went to grad school to become a lawyer, decided to become a journalist instead (so massive change in expected income – make about $60k a year).
So far I have been paying the minimum, with the advice that I will get loan forgiveness after 25 years. But with the current administration, and my loan ballooning so much (it will clearly be above $1million in 19 years) should I just refinance? Or do this whole insolvency thing if I plan on staying in the UK? I’m married and have a mortgage here so definitely here for the foreseeable future.
Or should I keep paying the minimum – or use this trick and $0 at all – and use the money to invest in a fund to cover taxes in the 19 years. So confused! Part of me wants to refinance to cut down the years of paying and ballooning interest but then don’t know which is the smartest move.
Thanks,
DW
If it was me in your shoes I’d use the tax returns to certify and show the legal $0 US AGI and pay the required $0 and put it in investments to cover the tax bomb. But that’s me
Hello, I am currently paying 0$ each month and every year I provide tax information showing that I don’t work in US . I leave in Europe and I make $500 month. So, do I still have to pay tax at the end of the loan when they will forgive me?! I have not made any money in the US!!!
Yes if you’re a US citizen you could owe the tax bomb
Ok, but how? I don’t have any income in U.S.?
What are they going to tax ?
Right now I have $31,000$ loan debt. How much will it be after 25years once it is forgiven?
Hi Travis,
Thanks for the read, very informational. How, if at all, does the information you provided above differ for US citizens who have moved to Canada? Does all apply the same, or slightly different based on the closeness of the US/Canada relationship?
It should actually be the same I think. Here’s one source that cites the FEIE for Americans living in Canada. That said dividends and interest income seem like they have to be claimed. https://www.theglobeandmail.com/globe-investor/personal-finance/taxes/american-expats-in-canada-heres-how-to-make-sense-of-filing-us-taxes/article19217822/
Hey Travis, thanks for the informative article. One of the best out there.
I’ve been living in Australia for another 5 years but haven’t filed taxes in the USA. I’ve been paying my student loans for 3 years and for 2 years they have been in forbearance. I don’t see myself being able to pay them off anytime soon as I stay at home with children.
I think I will start filing USA taxes and do the $0 agi suggestion. I know in the mean time my interest and balance will start crazily accruing and that scares me. When it’s time will the tax bomb be on all my Australian assets or will it be on the total balance of my student loans at the time?
I don’t have any extra income to even save for that at this time either.
Thank you
Not sure what the IRS will do but my guess is just US based assets. I’d do the 0 agi suggestion and get them out of forbearance.
Good read, Travis. I haven’t worked for the past 5 years while in university. During that time, I had never don’t a tax return because well, I had no income. I’m living off a disability compensation and making it by overseas. I have two questions I hope you can help me with. I’m in grace period but by September I’ll be able to apply for IBR. Do I need to go a tax return for acceptance into the program? I’ve read the paper form and it tells you to skip to question x if you haven’t done taxes and earned wages in two years. If I absolutely have to do a tax return, could I do it before September? Second question, is my disability compensating ever at risk of garnishment? I was told that it is not considered wages or income. Thanks in advance for your help.
Well depending on your disability if the Social Security Administration gives you permanent disability status then you could get your debt discharged completely. Barring that yes i think you need to file a tax return and submit that to get signed up.
Hello,
I have nearly 200k in student loans, but due to mental health issues have not had a job in years. I live in an EU country and I’m a citizen of that country. I did live in the US for nearly two decades (but I didn’t apply for a citizenship while there) and was going to continue living there and working after graduating from my PhD program, but then I ended up in a domestic violence shelter and due to the situation with that, I filed for divorce and moved back to my home country in 2013 with the idea of finishing my dissertation and then possibly returning to the US to work some day. However, my escape from my marriage at 40 and living back in my home country for the first time since I was 21 with questionable mental health took its toll and I had to quit the doctoral program. I was already struggling with my mental health in the US and applied for disability back in 2011. Also applied for it in my home country in 2014. Both were denied. Now I might apply for it again as I’ve been on a sick leave from the unemployment office since last year. I really would like to have a regular life with regular work, but this huge student debt is one thing that keeps me afraid to get an official job. I keep thinking I’ll immediately have to pay something and then I won’t even be able to eat or pay rent (which is currently paid for by the funding I’m getting from my government). Now that I read about what you’re saying in terms of it being okay to earn up to $100k, I guess I don’t have to worry about what to do if I get some itty bitty job that makes 500 euros. However, since it does seem likely that I’ll never have a regular income that can handle the 200k student debt, is there any way that a foreign national living abroad can get loan forgiveness due to disability granted abroad? Or would I need to be living in the US and get US disability in order for that to be an option? Anything else you’d suggest for me to do, so this student loan debt doesn’t end up running my life anymore?
All you need to do if it’s federal is consolidate it and use a legal US tax return showing your income under the FEIE exemption as 0 to get a $0 a month payment under REPAYE and that would fix most of your stress problem.
Hello,
I posted earlier, but I guess it didn’t get published yet. I was asking about the $100k clause. But I just talked to Nelnet and since I’m on an IBR with 0$ monthly payments right now, she said that even if I started earning money, it would still be calculated using their formula for the IBR, so I’m not in the category where I could exclude $100k income. Then I asked about the disability loan forgiveness when living overseas and she said that I’d still have to pay on the loans, depending on how much the disability payments were. I feel so completely stuck again that I feel like there’s no way out of this. I haven’t been well enough to get a job and even if I did get a job, I’d have to pay on the student loans from my little income (no exclusion clause for me, apparently), and if I got disability, I’d still have to pay on the loans. I feel like there’s a wall in every direction I look. My ex-husband and I went through bankruptcy in 2012. I wish I’d been able to get rid of the student loans then. Maybe I could have some kind of a life by now. Any advice?
Hi, I graduated a few months ago and my loans entered repayment. I’m in New Zealand already and I planned the 0 AGI strategy for my debt. Am I correct in thinking that I cannot use the 0 AGI strategy until next spring (until I file from NZ) bc my last year’s tax return is the only one I can currently submit (I didn’t make much having been in school full-time, but my husband did have a salary). What can I presently do to avoid payments until I have this year’s tax return with 0 AGI? Is some sort of forbearance my only hope? Thanks!
You could probably get a forbearance until you can use the tax return from NZ.
I’ll try that! Thank you!!
Hi there,
I’m living abroad and looking at $0 AGI as per your suggestion (thank you!)
The application for the Income-Based Repayment is very straightforward and there is a question about my AGI, so that’s all clear. But this is what puzzles me: although they get your AGI, they still ask for this:
“This is the income you must document:
You must provide documentation of all taxable income that you and your spouse (if applicable) currently receive.
Taxable income includes income from employment, unemployment income, dividend income, interest income, tips, and alimony.
Do not provide documentation of untaxed income such as Supplemental Security Income, child support, or federal or state public assistance.
This is how your document your income:
Documentation will usually include a pay stub or a letter from your employer listing your gross pay.
Write on your documentation how often you receive the income, for example, “twice per month” or “every other week”.
You must provide at least one piece of documentation for each source of taxable income
If documentation is unavailable or you want to explain your income, attach a signed statement explaining each source of income and giving the name and the address of each source of income.
Copies of original documentation are acceptable.
The date on any supporting documentation you provide must be no older than 90 days from the date you sign this form.”
I went with the application until the final “sign and submit” but I haven’t done it because I fear that they will ask for all those documents in the next step. Is it still going to be ok and calculated based on my AGI or do I need to worry about them actually seeing my salary from abroad??
Thanks a lot!
Ria
That’s really for alternative documentation of income (if you wanted to claim your AGI isn’t representative), if you decide to use the tax returns that should work ok.
What is happening with those people that is near to retire and need to wait until the 70 years old for the forgiveness loan? If they move before to another country, they garnish your retirement or not.
You might be able to consolidate the loan again to avoid the tax, but right now you need to file US taxes every year and use that as proof of income.
I am afraid that someday the US government will figure out this loophole and start to consider AGI without considering the foreign earned income tax exclusion. Do you have any comment on whether this is a possibility? Or do you think that for some reason the government is knowingly letting foreign workers claim 0 dollars in AGI?
Sure but it took 20 years for Australia to close a similar loophole and not enough people are doing this right now for the govt to care that much.
I’m 25, just got married in the US and recently we both graduated. Going from being single to married made our income driven student loan payments jump from $150 to $400/month, for each of us. With the wedding loan payment and my additional class I needed after graduating, it’ll be impossible for us to afford this and our rent, car, food, etc. Is our best bet to try and leave the US? I feel like I’m screwed.
There could be things aside from marriage causing that like them looking at your most recent tax return which could be much higher than a couple years ago. If you feel like you would make the same income abroad then yes you might move to get the payment to 0.
Hello,
Oh boy, where to start.
I finished school in 2010. I started paying my debt six months after graduating. I started travelling the states and didn’t have a home or a steady job on and off for a few years. I stopped paying my loans and they went into deferment .. I continued to ignore them and have been living abroad since 2015. Out of sight out of mind. I recently married my Swedish husband and we have an apartment in Sweden. BUT in order to get residency I HAVE TO be in America to apply & then wait it out. The process will be anywhere from 5-15 months so I got a job. I know my loan has gone into default and really I could care less about my credit and I don’t own anything … but while I am working here I don’t want them to garnish my wages. I finally called Action Financial and they said I could do the Loan Rehabilitation program. It would be $5 a month for 9 months and once I finish the 9 months I’ll get hit with a new monthly payment .. the last payment I made was probably 5 years ago? I didn’t pay for ages and then did one big payment to them of like $800 just to have them back off a bit … but if I sit this out … will it disappear? 7 years rule ? I know once I make a payment again ( the $5) it basically reopens the wound.. I have no idea what to do. Or who to talk to about this.. once I my residency gets granted .. I am going to be living in Sweden … I have no desire to live in America and again I don’t care about my credit.. I know my aunt co-signed when this all started … she has never said anything to me about them contacting her… I’d obviously hate for my actions to interfere with anyone else’s life..
Please help! Any advice is appreciated. I wouldn’t mind doing the rehabilitation blah blah & then trying to sort it out… but I am feel torn. I need an adult. Thank you!!
Do the rehabilitation. That will wipe it off your credit score and that tells me the loans are federal, so when you get them fixed then sign up for the REPAYE program. You’ll need to file a US tax return (just showing $0 income with the foreign income exclusion) and you’re required pmt will be 0 a mo and youll get half your interest covered and eventually it will all be forgiven.
Thanks Travis for responding. I have gotten more information and just have a few more questions. My students loans were through the Dept. of Education. It moved over to Action Financial in March 2019. They said there is no co-signer and there has never been a payment on this loan ( must have been from 2010? When I finished school ..) I will be moving to Sweden for good in the next 8-15 months. Like I mentioned before , I just got a job for the time being. I am only making $2.50 an hour since I am waitressing. My checks are going to be rubbish anyways .. I don’t think the 15% they can garnish is really going to effect me. My credit score is 550. I don’t own anything and never plan on getting a loan or buying a house here.. do you think I should still do Loan Rehabilitation ? She said it’s only my social security number on the account.
I also read up on other people doing the rehabilitation and then their REPAYE is overwhelming and they go back into default..
I am confused when you say “ showing $0 income with the foreign income exclusion” what does that mean exactly ?
Thanks again . Very much appreciated.
Hi Travis,
My question is: I have some money in the 401K account. Can IRS garnish my 401K funds to re-pay my student loan, in case, I ever get into default?
Also, if I choose to file tax return $0, after 20 years, when my balance will be forgiven, and it is time pay income taxes on the forgiven balance, can IRS garnish my 401K?
Thank you,
Jose
Probably not but if you owe less than what you owe you’re insolvent and the government forgives it without tax
Hello!
So I attempting to rehabilitate my defaulted gov loan. I live abroad (for the past two years), and have been in pursuit of a high paying job in this country. I was told if I do my tax returns and prove that I do not live there, my IBR would be 0$. My only problem is now, is if I send in my tax return (with my information of where I live and work abroad) and then use this tax return to prove I don’t make money here in the US, will the loan company I am rehabilitating my loan with use the information from the tax return to pursue me in any negative way?
You dont get pursued negatively when trying to rehab your loan, and if you do you should contact the Dept of Ed. I would just show US tax returns and base your rehab payment on those. If you dont care about your credit you can consolidate the loans and get it setup immediately but hangs on your credit for 7 years if you do that.
Dear Travis,
I graduated 10 years ago and due to bad marriage, small baby and no job, I returned to my home country. I AM in Europe and have been Making 500 e/ month for years. I haven’t filed for my USA tax untill last year with income of $16.000 that I received on 1099 as I started working remotely for company From USA. This year I made $18.000 and I also was planning to file tax. I guess now it Is late for 0$ strategy. Couple months ago I called department of education, they just told me I should call collection agency. Since they didn’t hear from me in almost 10 years I am not sure what Is the best strategy to solve this. Loan went I think from around 35.000 to 55.000. I want to move back to USA and get my life back, my child Is about to start High School, and I believe I can make it one day, but I need some lead time before they hit me. I am scared to have any money in my bank acct. If I open LLC and work like a contractor, and pay minimum wages to myself can they take money from my LLC? I understand they can take it from my personal account and wages? What Is the best way to make a deal with them? Should I just call and say I am never coming back to check if they will offer something good before I actualy go back and get myself into that trouble. Thank you in advance!
I’d suggest contacting a student loan attorney since the loan is 10 years old. If it’s private you might be able to discharge it https://www.studentloanplanner.com/student-loan-lawyer/
If it’s federal you can’t and you need to consolidate it to sign up for the REPAYE plan, you should qualify for 0 a month payments.
Hello Travis,
This is our first year filing from abroad. My wife has student loans. She is not working and I earned quite some extra money in the 2019, so our joint AGI would be around $90,000 for a family of 4. If filing separately, her tax return would naturally show AGI of $0. Should we file separately and will my currently high AGI affect her eligibility for income-based repayment? There’s a number of plans one can be eligible for that are based on AGI, does it matter which one she applies for?
Thanks a lot!
This one is a bit more complicated. Our team would want to see what the joint AGI actually looks like and what plans she’s eligible for. Thats usually a consult service we would need to do: https://www.studentloanplanner.com/hire-student-loan-help/
Dear Travis,
I would like to pursue a career in teaching abroad in Europe. I have student loans (approx. 45k), and am aware that my salary will decrease abroad due to lower cost of living etc. I plan to start teaching in August/September 2021, so half of the beginning of that year, I will still be earning American income. When do u suggest I apply to change my payment plan (currently set to graduated extended) to the PAYE plan? And should I begin filing the taxes for the $0 the following year in 2022? Or 2023? Should I apply for forbearance and then apply for the PAYE once I get setup in Europe? Additionally, I will already be making payments towards a personal cc loan which is fine, and maybe setting aside funds for the tax bomb will be the best method to tackle both my student loans, my personal cc loan and daily living abroad. Please advise.
Thank you!
Change it to PAYE now.
Hey Travis,
Medical student graduating this year with about 350k debt going into primary care. Have no desire AT ALL – to stay in America. Especially with the B.S. going on now. If I was to take a job in Europe making about 150k a year, would I be able to apply the $100,000 year abroad deductible and literally pay pennies of what I am supposed to for years to come?
The IRS has a few guidelines you must meet to qualify, but yes – that’s really how it works! We’ve met lots of borrowers who pay $0. You might find this IRS article helpful: https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion
Dear Travis,
I’ve been on the IBR/IDR plan for 7+ yrs paying 0 since I live in Europe and make under 100k. I owe almost 200k in student loans. I never had problems re-certifying but this time Fedloan denied my IDR request. I’m married to a German and file my US taxes separately. If my loans go into default can they garnish wages from me or my husband? And do you know why they would suddenly deny my IDR recertification when my financial status has not changed?
Thanks a lot for your help!
Hi Pam, here is what our consultant Meagan has to say: I would just try to resubmit – could be a goof up on their end with COVID + they should be aware Fedloan will be stepping down for loan serving EOY (does not change anything with the loans, just the company processing payments and paperwork). No they cannot garnish foreign earned income/wages but just submit another application.