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College Students and Recent Grads

Can You Really Get Rid of Student Loans by Leaving the Country?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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A college degree that didn’t lead to your ideal job. A stack of student loan bills you can’t afford. A collections agent blowing up your phone.

For any of these reasons, you might be seeking a way out — even out of the country. Leaving the U.S., however, might not solve your education debt.

Can you escape debt by leaving the country?

The short answer is no. The debt will still be there.

There’s no statute of limitations on federal loans, meaning that you’d be responsible for repaying your debt when or if you return to the U.S.

For private loans, on the other hand, state laws do put limitations on lenders’ ability to sue over your old loan debt. However, these statutes last years and won’t stop collections agencies from contacting you, regardless of where you reside.

If you abandoned your debt, you would need to establish an income and credit report in your new country and otherwise lay down roots.

But just because you could abandon your American debt doesn’t mean that you should.

For one, you have a moral dilemma on your hands: You borrowed money to fund your education, and although the borrowing and repayment process might seem unfair, you did agree to repay it.

But even if that’s not an issue, you still have to ask yourself whether you’re willing to face the consequences of creating zombie debt that will hang over your head.

Consequences of a move overseas to escape student loans

It’s impossible to say whether you’d need to look over your shoulder, wary of creditors on your tail. They might not have the willingness or the wherewithal to track you down.

You also can’t be arrested for your debt, and, no, your passport isn’t at risk. Still, the punishments of ignoring your debt can be severe. Some effects include:

Your loan balance will balloon

Just because you disappear doesn’t mean your debt will too. Quite the opposite — it’ll continue to grow. Interest will accrue and capitalize onto your balance each month that passes without payment.

If you skip town $40,000 in the hole at 7.00%, for example, your balance would collect about $16,000 worth of interest after 10 years, and almost $35,000 after 20 years.

Your credit score will tank

Although your credit score won’t follow you overseas, it will only worsen while you’re away.

After all, more than a third of your score’s composition rests on your payment history. By ignoring your payment due date, your score will take a nosedive. And when you default, the status will show up and stay on your credit report for up to seven years.

With such poor credit, you’ll have a hard time after your stateside return borrowing money in any form, including a home mortgage, car loan or credit card.

Your wages could be garnished — and worse

Once you default on your federal loans — that is, fail to make a payment for more than 270 days — your servicers could send your debt to a collections agency, where it will incur more fees.

The Department of Education could then take the following measures to collect your debt:

  • Treasury offset: The government could withhold any federal money you were set to receive, such as income tax refunds and Social Security benefits. Your driver’s license and/or other state-issued licenses could even be forfeited.
  • Wage garnishment: Your collections agency could require your employer to hand over 15% of your paycheck to put toward your defaulted loan. If it’s unable to take your income — perhaps because you’re self-employed — then you might face a lawsuit from the Department of Justice.

Private lenders vary in their practices, but you can bet they’ll farm out delinquent loans to their debt collection agencies. They can also sue you to secure a percentage of your income.

Your cosigner could be left hanging

Federal loans are borrowed in the student’s name, so you — and only you — are on the hook for them. The family you leave behind in the U.S., however, might have to deal with phone calls or mail from collections agencies.

Private loans are a different story. In all likelihood, you asked a family member to cosign your loan as an undergraduate, since about nine of 10 private loans are cosigned.

By leaving your debt and country, however, you’d be passing the buck to your cosigner. Mom, Dad or whoever else could be legally responsible for repaying your debt, potentially putting a stranglehold on their finances.

Can you even move to another country with student loan debt?

Just because you shouldn’t leave the U.S. to flee your student loans, however, doesn’t mean you’re trapped inside the country until your debt is repaid. If you’re motivated to live abroad for reasons other than escaping your education debt, consider that you could take your debt along for the ride.

You might make progress in repayment, for example, if you can earn an American salary but reside in a country with a lower cost of living.

No matter where you decide to shack up while repaying your education debt, consider these tips.

Explore repayment plan options

Whatever ails your loan situation so much that you’re considering quitting your repayment, know that there are debt relief options, including:

Income-Driven Repayment (IDR)

On the federal loan front, consider switching repayment plans. IDR would allow you to limit your monthly payment amount to a percentage of your discretionary income, making it a good option if you’re out of work or climbing the career ladder from the bottom. Keep in mind though that when you lower your payments and extend your loan term, your debt grows because of accruing interest.

Unfortunately, private lenders generally don’t offer IDR, but they could be willing to adjust your repayment if you fall on hard times.

Deferment or forbearance

There are more than a dozen types of eligibility for deferment and mandatory forbearance on federal loans. These measures pause your payments while you get back on your feet. To cure your wanderlust, you could even defer your loans for up to three years by joining the Peace Corps.

Private lenders’ protections are typically less comprehensive, so talk with your lender about what it offers.

Student loan refinancing

You’ll need good credit and steady income (or a cosigner) to qualify, but student loan refinancing could solve several of your repayment problems simultaneously. It could consolidate your debt into one new loan, potentially lower your interest rate and give you the power to choose your new (private) lender.

Just be aware that by refinancing federal loans, they’ll be stripped of the federal safeguards that come with them, such access to IDR and some loan forgiveness programs.

Budget for travel — and loan payments

Once you know how much you need to spend to keep pace with — or, better yet, attack — your loan balance, it’s time to budget. This step is crucial if you’re planning to live abroad. A budget will serve as your roadmap, helping you to estimate the affordability of the life you want to lead and the debt you’re due to repay.

Cutting U.S. expenses like apartment rent and utility bills is a great start. You can also maximize your money by choosing the right country. You might have designs on visiting Scandinavia, for example, but then find that Southeast Asia is more in your price range. Nomadlist is an excellent resource to help plan for potential monthly costs on a city-by-city basis.

Increase your income

You can budget until you’re blue in the face, but eventually you’ll run out of expenses to trim. Give yourself more wiggle room by increasing your income at home or abroad.

If you’re fortunate enough to work remotely and take your American salary with you, you might already have the cash flow necessary to travel cheaply and still pay down your debt. You might also seek side gigs like teaching English as a second language in another country.

Keep your American bank account

Even if you’re not sure when you’ll return to the U.S., keeping your American bank account will ease your student loan payments. You won’t want to deal with foreign transaction fees, for example.

Additionally, by keeping your domestic checking account, you can score an interest rate reduction with some lenders and servicers by signing up for autopay.

You can repay your debt and still wander the world

Leaving your home country for a clean slate elsewhere is an age-old strategy. But unless you’re planning to leave the U.S. permanently, it could wreck your student loan debt situation.

Before you book a flight, consider the consequences of wandering the world without a repayment plan. Whether you choose to live in the U.S. or abroad, there are plenty of ways to get back on track. You just have to look for them.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Andrew Pentis
Andrew Pentis |

Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

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College Students and Recent Grads

Step-by-Step Guide to Applying for Private Student Loans

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Once you’ve maxed out your eligibility for federal financial aid, you might turn to private student loans to cover the costs of college. But you’ll soon discover that applying for private student loans is a different process than applying for federal ones.

To access private loans, you’ll need to seek out a bank, credit union or another financial institution. Along with all the required paperwork, you might also need a cosigner to sign on to your application. Learning how to apply for private student loans before you act will help ensure there are no delays along the way.

Applying for private student loans in 7 steps

1. Determine how much money you need to borrow

Your first step to getting a private student loan involves figuring out how much money you need to borrow. Private loans can be used for any eligible educational expenses, including tuition, fees, textbooks, room and board and other living expenses.

Take a look at your school’s estimated cost of attendance, which you can typically find on its financial aid website or your financial aid letter. Take the amount listed and subtract any other aid you’ve already received, like federal student loans, grants or scholarships.

If you haven’t received aid yet, the FAFSA4Caster tool can help you estimate your award. After submitting the Free Application for Federal Student Aid (FAFSA), you’ll also see your Expected Family Contribution (EFC), or the amount your family is expected to pay out of pocket.

If you still have a gap in funding after aid has been applied, you might fill it with a private student loan. But be careful about borrowing too much — you don’t want to be stuck with a burdensome amount of debt after you graduate.

What’s more, you probably can’t borrow much beyond your school’s cost of attendance anyway, since your school will likely have to certify any amount you request from a private lender. Estimating your costs will give you a good sense of how much you’re eligible to take from a bank.

From there, you can look for ways to lower the amount you need to borrow in student loans, whether that involves applying for more scholarships or working a part-time job during college.

2. Research private lenders

Once you have a sense of how much you want to borrow in private student loans, it’s time to research your options. You have lots of choices when it comes to borrowing a private student loan.

To save you some time, we’ve vetted private student loan lenders to help you find some of the best ones. Here are a few of our top recommendations for lenders with excellent rates and terms.

Since each lender is different, it’s useful to compare your options to find one that’s best for you. Along with finding the lowest interest rate, you might also look for other perks, such as flexible repayment options or a reputation for good customer service.

3. Compare private student loan offers

Another advantage to several of the lenders mentioned above is their offer of an instant rate quote. After heading to their website, you can check the rates available to you with just a few pieces of basic information, such as your name, school, and the amount you wish to borrow.

At this point, you can immediately see some pre-qualification offers, along with the rates you might get if you apply. This instant rate quote makes it easy to compare offers from multiple lenders so you can find one with the best terms.

Plus, it won’t impact your credit at all, since it’s just a soft credit check. Remember, however, these are only pre-qualification offers — you’ll need to submit a full offer and consent to a hard credit check to see your final loan offer.

But these pre-qualification quotes do give you a good sense of what you could be eligible for, as well as help you narrow down your options for lenders. Note that not every lender offers an instant rate quote, and you probably shouldn’t neglect the ones that don’t.

If you belong to a bank or credit union, for instance, it could be worth speaking with them about a loan to see if you can get an even better deal. Still, taking advantage of instant rate quote or loan comparison marketplaces such as LendKey will help you get an initial sense of what’s available.

4. Find a cosigner if necessary

Unlike the federal government, private lenders have underwriting requirements for credit and income. You’ll need strong credit and a steady income to qualify for a loan, as this reassures the lender you’ll be able to pay back your debt.

Most undergraduates can’t qualify on their own, so they apply with a cosigner, such as a parent. However, know that your cosigner becomes just as responsible for the debt as you are — their credit is on the line in the event you can’t pay, so have a conversation with your cosigner before applying for private student loans to ensure you’re both on the same page about who’s paying back the debt.

Cosigning debt isn’t a decision that should be made lightly. It’s important to clarify expectations so no one’s finances (or relationships) get hurt.

5. Gather the required paperwork

Once you’ve done the preliminary research, the time has come to collect all the necessary documentation. If you’ve submitted the FAFSA, you might already have some of this information on hand.

Although requirements can vary, most private lenders ask for the following:

  • Social Security numbers for you and your cosigner (if any)
  • Personal data, such as your date of birth, home address and phone number
  • Annual income, with pay stubs or W-2s as supporting documentation
  • Employment information
  • A copy of the previous year’s tax returns
  • Monthly rent or mortgage payments
  • A list of assets and their values
  • Contact information for a personal reference
  • The Private Education Loan Applicant Self-Certification form, which you can obtain from you school’s financial aid office or the Department of Education

Each lender sets its own requirements, but the majority will want most of the documents on this list. Gathering them in advance will help your application go smoothly.

6. Submit your application for a private student loan

Once you’ve done your research, chosen a lender and gathered your information, the time has come to submit your private student loan application. Most lenders make it easy to apply for a private student loan online.

This process shouldn’t take long, especially once you have all the relevant documents at the ready. You’ll usually start by filling out your personal information, as well as the details for any cosigner. You’ll have to indicate where you’ll be attending school, as well as the loan amount you’re requesting, and likely upload verifying documents, such as pay stubs or tax returns.

Your final step will be acknowledging the lender’s terms and conditions before hitting submit. At this point, most lenders will reach out to your school to certify the amount you requested.

Assuming all goes well, the lender will likely send the funds to your financial aid office. After applying it to your tuition bill, your financial aid office will return any remaining funds to you.

You can use this money on living expenses, or you can return it to the bank so you don’t have to pay interest on it. In fact, you can always prepay your student loan ahead of schedule without penalty.

Note that some lenders will send the funds directly to you, rather than to your financial aid office. In this case, it’s your responsibility to get the loan money and pay your tuition bill.

While you can borrow a private student loan at any time throughout the school year, don’t leave your application until the last minute. The process can take some time, so you want to ensure the money arrives in time to pay your tuition bill before the deadline.

7. Read over the terms of your contract before signing

Once your application has been submitted and approved, make sure to read over your student loan contract before you sign it. Check to see exactly how much you’re borrowing, along with your repayment term, interest rate and monthly payment.

Find out if you need to make any payments while you’re still in school, or if you have a grace period that extends for a few months after you graduate. Use our student loan calculator so you have a clear understanding of the long-term costs of your loan.

Finally, find out if your lender offers any alternative repayment options in the event you lose your job or return to school in the future. For instance, some lenders will postpone payments temporarily if you run into financial hardship or go to graduate school.

Learn about your options beforehand so you don’t make any false assumptions about your private student loan options.

Applying for private student loans doesn’t have to be arduous

Applying for a private student loan might feel daunting when you’re heading to college the first time, but the process will seem easier after you’ve gone through it once. Learn how to get private student loans well before the school year starts, so you won’t be left scrambling when tuition is due.

And make sure you shop around with multiple lenders before choosing one to finance your education. By putting in your due diligence now, you can find a private student loan with the best rate and lowest costs of borrowing.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
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Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

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College Students and Recent Grads

Can You Transfer Private Student Loans To Federal Loans?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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You might have heard all the buzz about federal student loans being refinanced at lower interest rates by private lenders. That could leave you wondering whether you can accomplish the opposite and transfer private student loans to federal loans.

This would be a great option, since consolidating private student loans to federal debt would allow you to score government-exclusive protections like special repayment plans and forgiveness options. But unfortunately, transitioning loan types only works in one direction.

Still, there are other alternatives to make your private student loan repayment easier, as we’ll discuss below.

Can you transfer private student loans to federal debt?

Private student loans are borrowed from banks, credit unions and online lenders. They’re awarded based on your (cosigner’s) credit history and include perks like potentially lower rates, more repayment term options and, often, better customer service.

Unfortunately, they’re missing one key feature: There’s no way to consolidate private student loans into federal education debt. Once your debt is private, it stays that way.

On the other hand, it is possible to combine your debt into a single loan. Both federal loan consolidation and private refinancing allow you to do this and pay just one monthly bill. But there are significant differences between the strategies, starting with loan eligibility.

 Direct loan consolidationRefinancing
Eligible loansFederalPrivate or federal
LenderDepartment of EducationBank, credit union or online lender
PurposeGroup federal debt at its average interest rate, rounded to the nearest ⅛ of 1% (fixed rates only)Group education debt at an interest rate awarded based on your creditworthiness (fixed or variable rates)
Key benefitsKeep federal loan protections, including income-driven repayment, forbearance/deferment and pathways to loan forgivenessReduce your interest rate to save money, shorten or lengthen your repayment term, and switch lenders
Key costsExtending your repayment would allow more interest to accrue over time, and it could reset the progress you’ve made toward certain loan forgiveness programsYielding the protections (like income-driven repayment) on any federal loans you elect to refinance

So, no, you can’t transfer private student loans to federal loans. You could either consolidate your federal loans into a direct consolidation loan with the Department of Education, or you could consolidate your federal and private loans via refinancing.

The best alternative to consolidating private student loans to federal debt

If you were hoping to consolidate private student loans to federal, consider the next best option: Finding a private lender whose product mimics what you like about federal loans.

No private lender will match every aspect of a federal loan. You won’t find subsidized loans (where some of the interest is paid for you), student loan forgiveness or the ability to switch repayment plans for free and at a moment’s notice. Those options only come from Uncle Sam.

However, there are plenty of federal loan-like features available at banks, credit unions and online lenders, including:

  • Fixed interest rates: Your rate will stay the same for the life of the loan
  • Six-month grace period: Smaller payments or no payment for six months after you leave school
  • In-school deferment: Smaller payments or no payment while you’re in school, usually at least half time
  • Autopay rate reductions: Often a 0.25% discount on your interest in exchange for setting up automatic payments
  • Economic hardship forbearance: Possible pause on repayment if you suffer a hardship such as losing your job
  • Tax-deductible student loan interest: As with federal loans, you can write off the interest paid on your student loan

You might even find an income-driven option in the private marketplace, setting your payment at a fixed percentage of your disposable income. The Rhode Island Student Loan Authority and industry major SoFi make a form of income-driven repayment available to its borrowers — but only in cases of financial hardship.

What to know about student loan refinancing

Because student loan refinancing allows you to potentially lower your interest rate, the eligibility requirements aren’t forgiving.

Typically, you need good-to-excellent credit and a stable source of income — or a cosigner who enjoys both. It also helps to have made full and prompt payments on your loans.

Even if your application is strong enough to gain approval, it might not qualify you for the low end of lenders’ advertised interest-rate ranges. If you need a credit score of 650 to be eligible at Earnest, for example, you’ll likely need a score 100 or more points higher to access the best of its rate offerings.

A lower interest rate makes all the difference. Say you currently have a 9.00% rate on $20,000 worth of private student loans to be repaid over the next decade. Refinancing that five-figure debt to a 5.00% rate would save you nearly $5,000 in interest over 10 years, according to our student loan refinancing calculator.

Still, a reduced rate isn’t the only factor that should nudge you toward refinancing — especially if you’re privatizing your federal loan debt, too. Refinancing is irreversible and would strip your federal debt of its government-exclusive protections.

On the other hand, note some of the advantages a refinanced loan might have over federal debt, such as:

  • Option to apply with a creditworthy cosigner
  • Ability to choose fixed, variable and hybrid interest rates
  • Access to a wider choice of repayment terms, often between five and 20 years

Consider whether student loan refinancing is right for you

Not being able to transfer private student loans to federal debt shouldn’t feel like the end of the world.

After all, at least you retain the option to transition your debt in the other direction — moving your federal (and private) loans to a bank, credit union or online lender that offers low rates or other attractive terms.

While not suitable for every borrower, student loan refinancing gives you the power to press reset and charge forward on your repayment. To gauge its usefulness for your situation, explore the pros and cons of refinancing.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Andrew Pentis
Andrew Pentis |

Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

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