If you’re dreaming of working and living abroad, you might be worried about whether international employment qualifies for Public Service Loan Forgiveness (PSLF). Whether you’ve been in residency for a few years at an eligible facility or work at another qualifying nonprofit or government organization, getting credit toward PSLF for those precious years is essential.
Ultimately, you can work abroad and get credit for PSLF if — and only if — your employer is a U.S. based nonprofit or government entity.
What is PSLF?
PSLF stands for Public Service Loan Forgiveness Program and is geared toward professionals who work in public service. To attract more workers to the public and nonprofit sector, PSLF offers forgiveness after borrowers serve working full-time for 10 years and make a total of 120 payments.
A major benefit of PSLF is that the forgiven amount isn’t taxed, unlike forgiveness under an income-driven repayment plan (IDR) where there might be tax repercussions.
To be eligible for PSLF, candidates must have direct loans (or consolidated federal loans) and be employed at an organization that meets the program’s employer criteria. Generally, any U.S. government entity or nonprofit organization will qualify.
International employment under Public Service Loan Forgiveness
If you’re currently working overseas or eyeing opportunities abroad, you might want to know if you are or will miss out on PSLF forgiveness opportunities.
Although it’s not impossible to get PSLF while employed abroad, it might be more difficult and nuanced. You can work internationally, but the company that distributes your checks must be based in the U.S. and be an eligible nonprofit or government entity.
A Peace Corps or U.S. State Department overseas assignment, for instance, might count as qualifying employment. The Department of State’s Foreign Service Specialist Benefits overview clearly states that employees are eligible for PSLF.
Another example of an unclear eligibility situation is if you’re a physician working with Doctors Without Borders. Doctors Without Borders workers do qualify for PSLF as it’s a registered 501(c)(3) with a federal tax ID number and a U.S. headquarters. PSLF is also listed as one of its benefits.
Similarly, you might also qualify for PSLF while working under:
- U.S. Agency for International Development (USAID)
- U.S. Personal Services Contractor (USPSC)
- U.S. Armed Forces
How to tell if your international employment qualifies for PSLF
Some hints that your international employment may qualify for PSLF include:
- Your company is a U.S.-based nonprofit or government organization.
- The employer has a federal tax ID.
- You’re getting paid in U.S. dollars into a U.S. bank account.
Your time won’t qualify for PSLF when you work for:
- International government
- International nonprofit
- International organization
So if you work for a foreign government entity, like the North Atlantic Treaty Organization (NATO), the United Nations or a similar organization, you’re ineligible for PSLF. If you’re still unclear, check out the PSLF Help Tool, or contact your current or prospective employer.
Alternatives to PSLF when working abroad
If you find out that you’re out of luck because your international employment doesn’t count toward PSLF, you have other options.
Income-driven repayment (IDR) forgiveness
Federal loan borrowers who are working abroad or want to work overseas can also check out income-driven repayment forgiveness. This option doesn’t have the employment requisite that PSLF does, expanding the possibilities for many people.
However, this repayment term is much longer at 20 to 25 years, but your payments are just 10 to 20 percent of your income.
Four different IDR plans can all offer forgiveness at the end of the term:
- Pay As You Earn (PAYE)
- Saving on a Valuable Education (SAVE), formerly called REPAYE
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
The drawback of this type of forgiveness over PSLF is the potential to have a tax hit on the forgiven amount you receive. However, workers abroad might have a unique advantage thanks to the Foreign Earned Income Exclusion.
In 2022, a U.S. citizen working abroad can exclude a good chunk of income, if not all of their income — up to $112,000. Let’s say you earn $65,000 abroad. That would qualify you for $0 in AGI, which would effectively lead to zero-dollar monthly payments through IDR. All of this would keep your loans in good standing while you pay nothing.
This can be a winning strategy for people who might not get a U.S. paycheck abroad. Just make sure to sign up for an IDR plan with your loan servicer and fill out the necessary paperwork.
Student loan refinancing while working abroad
If forgiveness isn’t in your future, but you want to make payments more tolerable and pay less overall, check out student loan refinancing. A refinance loan might help you lower your interest rate if you’re eligible.
This lower rate helps you lower your interest costs. Keep in mind that a student loan refinance is a private loan, regardless of the type of loan you originally held. If you already have private loans, this route can be appealing and low-risk.
However, if you have federal loans, a word of caution: You’ll no longer qualify for PSLF, IDR, forbearance, or loan cancellation through any program. Evaluate this risk carefully because an income-driven repayment plan or extended forbearance option can be helpful when you move back to the U.S.
Regardless, if you’ve settled abroad and have stable income and employment, student loan refinancing might be an option to ditch debt ASAP.
Yes, you are still required to make monthly student loan payments, even if you move to another country. One way to potentially get around this is if you have federal loans and are on an income-driven repayment plan. Through the Foreign Earned Income Tax Exclusion, you might be able to report no or low income, and have no or low payments count toward IDR forgiveness.
Moving abroad and not paying student loans might affect your credit. You’re still responsible for your loan payments and your loan account can end up in delinquency or default. This student loan status can trigger a tax refund or Social Security benefit offset in order to collect on the debt.
Moving overseas may help student loan repayment in a couple of ways.
If you can lower your cost of living, you might be able to free up additional income to put toward your student loan debt. Additionally, it might be possible to pay zero-dollar monthly payments via income-driven repayment because of the Foreign Earned Income Tax Exclusion.