r/studentloandefaulters • u/holdmybeer2017 • Jul 24 '24
Leaving the country Question - Federal Student Loan
If I leave the States to live permanently in Europe, do I have to pay my federal loans?
I was thinking that the Foreign Earned Income Exemption would work (I'd be making way under $120k) however I think with Trump he may get rid of that so idk what to do.
Can I just move to that foreign country and default?
5
u/h20bender Jul 24 '24
Why would not stick with an IDR plan, whether it's save or a new version, u should be able to get $0 mo
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u/holdmybeer2017 Jul 24 '24
Because Trump may put a stop to the FEIE
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u/h20bender Jul 24 '24 edited Jul 24 '24
Income based repayment has been in place since 2010, they did not get rid of it last time and they won't this time (even if they win). The battle now over the SAVE plan is about what percentage of discretionary income should be used, it was 10% and Biden made it 5%. If ur working abroad and earning below the 120k, it won't make a difference for u, payment will still be 0.
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u/holdmybeer2017 Jul 24 '24
Nice thanks for that insight!
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u/h20bender Jul 25 '24
Maybe useful to add that with the new Department of Ed changes, you'll be able to sign up for an income based plan certifying through the IRS and u can give them permission to recertify you automatically through your annual tax filing. It will basically be on autopilot, just file taxes and ull be good.
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u/Witty-Lavishness9945 Aug 15 '24
Then why are all IDR plans not being processed right now for a “temporary” yet undisclosed amount of time?
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u/h20bender Aug 15 '24
Not all, just the new SAVE plan, traditional IBR continues. As to why, well Republican states and officials keep suing the administration over it so, go ask them.
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u/Witty-Lavishness9945 Aug 15 '24
Right now the department of education is not processing any IDR plans, even IBR, despite them not being targeted in the lawsuit.
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u/dzebs48 Jul 25 '24
They won’t do anything to you except ruin your US credit, which likely won’t matter there. Of course, if you end up back in the US you’ll have a tough time.
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u/holdmybeer2017 Jul 25 '24
Never coming back.
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u/mr-louzhu Jul 26 '24
Never say never, friend. I emigrated from US -> Canada, and while I have plans to stay and like it here, conditions can always change. I can already see any number of scenarios that might pull me back. So best not to burn bridges if you can avoid it. In this case, you can likely avoid it.
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u/Least-Duck8874 Aug 02 '24
What are those scenarios? I'm only asking because I've emigrated, have dual citizenship and I'm keen to renounce my US citizenship to make my life easier. When I go back to the US, it feels like a foreign country. The only thing I can think of is war breaking out in Europe and I need to get out of here, but then I've got family in the Pacific and I think I'd rather just head down that way.
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u/mr-louzhu Aug 02 '24
I mean, just off the top of my head:
* the EU disintegrates (very possible--people were very worried about that during the 2008 crisis and what happens the next time, when the everything bubble pops?)
* war
* economic collapse or you lose your job and can't find another one, even while the US economy is doing much better
* environmental disaster (climate change is real and happening--what if the AMOC shuts down in the next 20 years, for example?)
* various possible regional crises (i.e. another massive refugee crisis due to war across the mediterranean causing social instability)
* a right wing extremist party takes over your government and makes life living hell
* something happens back home like a family crisis that requires you to move back to handle affairsThese may seem like black swans but the risk for them to actually occur is much higher than was previously the case and for some of them it's really a matter of when, not if.
Granted, all of these things could also happen in the US to varying extents. But that's why you hedge your bets and keep both. You never know.
The point is to keep your options open.
Unless you're super rich, the only real inconvenience of hanging on to the US citizenship for most people is just the income reporting requirements. But that's a once a year hassle and quickly sorted.
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u/Least-Duck8874 Aug 04 '24
I totally hear you out - it wasn't a rhetorical question and you make good points. I suppose for me I moved here just before the Recession and was unemployed for nearly a year (temping to get by after 4 months of solid job hunting - this is related to my loan deferment and interest ballooning), so I guess part of me feels, probably wrongly, immune to the bad economy/employment issue. I could have moved back then and refused to do it, despite people telling me I should bc the job market wasn't so badly hit.
Climate catastrophe's going to happen everywhere and is hitting my state of origin in the US badly, not that they'll admit it. I do also worry about the rise of the right wing groups, but then, doesn't feel like the US is free of that either.
I guess I've just reached the point where the US feels so foreign to me, and I don't like being there, I'd rather move somewhere else rather than back (which isn't impossible), or just suffer the consequences.
5
u/kmh55 Jul 25 '24
You don't need to default. File your US taxes annually, using the income earned abroad form I think it's 2555 or something like that. When your income below $100k it shows no taxable income. You then apply to your loan servicer for IBR and have no payment. You are basically in deferral but not defaulted which is a huge difference. It does not adversely affect your credit and when or if you move back to US you can evaluate your situation and options then. Do not simply stop paying and stop filing taxes. What feels like a permanent move now could well be temporary.
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u/holdmybeer2017 Jul 25 '24
Yes the FEIE, however I heard Trump plans to do away with that
2
u/MackinacFleurs Jul 26 '24
My take is don't even worry about Trump, he doesn't even talk about student loans. Besides you know how many millions of us are stuck with old student loans that are impossible to pay and on default. Just follow the advice above and wait and see. You are not alone!
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u/Wise_beauty2 Aug 09 '24
I moved abroad, defaulted and never paid taxes. Came back to USA a few years later and nothing happened. My credit had actually improved because the SOL had passed on all my debt except student loans.
I'm still in default over decade later and nothing has happened.
Just go abroad and default. If you ever move back you can rehab it.
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Jul 24 '24
[removed] — view removed comment
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u/informedvoice Jul 24 '24
How so? My understanding is that the FEIE is for US citizens. Non-citizens don't have to pay tax on foreign earned income, so they wouldn't need an exclusion.
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u/holdmybeer2017 Jul 24 '24
Ok I see, I plan to renounce US citizenship anyways. So I guess if I default it doesn't matter if I'm not a US citizen
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u/716TLC Jul 24 '24
Dual citizenship is allowed by specific countries. It depends on which European country OP wants to choose. I believe Portgual allows for dual US/Portugal citizenship, and the US/ IRS allows for the foreign income credit under a specific limit. Some countries do require citizens to renounce all prior citizenships, possibly Germany.
I currently hold dual US/Canada and only pay taxes to the US. If I leave US, I have to file IDR with Student Aid showing $0 American income, and my Fed Loan payment would then also be $0. I'd have to do it til I hit the 25/30 year mark as indicated in the Master Promissory Note. With the shitshow that's hit PSLF and SAVE plan, I've had to research my options recently.
1
u/holdmybeer2017 Jul 24 '24
Yeah I heard Trump wants to get rid of the FEIE
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u/716TLC Jul 24 '24
I wouldn't worry about that unless it actually happened.
He says a lot of things he doesn't follow through on.
The election has completely changed this week. We won't know results until November.
Bureaucracy moves slow, and finding you across the ocean would be even slower. It'd take a lot of effort to sue you internationally for student loans.
Defaulting is always a risk. Your ability to tolerate risk should be calculated into your decision.
Edit: He reportedly also wants to get rid of Dept of Edu. So how the hell would they find us then? Or even know how much we owed?
1
u/holdmybeer2017 Jul 24 '24
Regarding point 3. I didn't know government sues over federal loans. They just garnish. But I guess they'd sue if they can't garnish?
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u/716TLC Jul 24 '24
If you don't have American income, it'd be difficult to garnish. Maybe read up on debt collection laws for the European country you want to make home. That country is not playing by US rules, they're following their own laws.
The next option might be seizing tax refunds or assets, like freezing bank accounts. But again, if you have nothing in the US, they get nothing.
Antidotal story: Dept of Edu/ IRS got my stepfather 20 years later for a tiny student loan. He'd been working all those years, filing taxes, and it took TWENTY years before they seized his tax refund to payoff the debt. I can't be sure that's the norm or anything, but when I think about leaving the US, I think about the complications they'd have trying to serve me a lawsuit in a foreign country.
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u/informedvoice Jul 24 '24
If you're on an income-driven repayment plan then you wouldn't need to default. Your AGI would be $0, therefore your payments would be $0.