It’s no surprise that America’s education system has left millions in student loan debt they can’t afford. Research shows the average 2017 college graduate finishes school with $39,400 in student loans, six percent higher than 2016. And altogether, Americans owe an astonishing $1.52 trillion in student debt.
Student loan debt can be so overwhelming that some have lenders have fleed America to avoid paying altogether. Vice profiled 4 lenders who did just that in 2016, prompting many readers to question if such a feat was really possible.
And the answer is yes…and no. Joshua R. I. Cohen, the self-professed Student Loan Lawyer, told Vice that it’s plausible to avoid paying student debt loans by moving abroad. However, there are many consequences that all lenders will have to face for doing so.
Below we’ve highlighted five things that every lender should consider before moving abroad to bail on their loans.
Your Debt Still Exists In America
Just because you’re able to avoid payments abroad doesn’t mean your student loans magically disappear. Keep in mind that the loans will continue to accrue interest, meaning your debt will become even bigger while abroad.
Prepare to see your credit go down the drain if you move abroad, too. According to Mark Kantrowitz, publisher and vice president of the college and scholarship information website Cappex, lenders are capable of reporting your missing payments to credit reporting agencies. This will ruin your credit history and make it even harder to get approved for a loan down the road.
If you’re thinking of leaving America to avoid debt, you may as well never come back.
Your Co-Signers Won’t Be Happy With You
Many students applying for a loan for college end up having a co-signer, which is a person who agrees to pay the borrower’s debt if he or she defaults on the loan. A co-signer is oftentimes a person’s mom, dad, family member, guardian or close relative.
Lenders unable to reach you abroad will eventually go after this cosigner. They don’t care if it’s your brother, sister or aunt – all they care about is getting the money they were promised. And this could have some serious consequences depending on the financial stability of your co-signer.
A debt dodger profiled by Vice left his co-signer parents responsible for $160,000 in student loans. “I could never really escape because my parents were co-signers,” Mario, 34, said. “My parents own a home and were planning on leaving it to us as inheritance. They were nervous about having their house taken away from them because of me not paying student loans, and subsequently signed the house over to my sister so they wouldn’t own anything the bank could come after.”
Establishing Yourself In Another Country Won’t Be Easy
It’s safe to assume that someone leaving the country to avoid student debt doesn’t have a ton of spare money laying around. Entering another country with empty pockets will make it much more difficult to establish yourself given you’ll likely need loans to do so. Simply put, you won’t have a credit history to get a loan on a car, home, or other basic needs abroad.
In addition to having no credit history abroad, you’ll be simultaneously ruining your credit back home. PolicyGenius contributor Paul Sisolak makes a great observation on why moving abroad can be more detrimental than anything. Even if someone does have the cash to establish themselves in another country, why wouldn’t they instead use it to pay off loans?
Living In America Won’t Be The Same
Debt dodgers returning to America will be forced to reckon with the mess they left behind. Depending on the severity of the situation, this could result in the U.S. government stripping you of your basic financial privileges. For example, the government could garnish a certain percentage of the wages you make back in the U.S. that will automatically go toward paying down student debt.
Those returning will also likely be met with dozens of robocalls, emails and letters from lenders. One debt dodger profiled by Vice said she was constantly declining calls from lenders once she was back in the U.S.
“Debt collectors haven’t badgered me in Berlin,” Vanessa, 29, told Vice. “They haven’t found me in Germany. But when I go home, my phone rings non-stop. I always think it’s an old friend trying to hang out with me, but it’s really Sallie Mae. It rings like every hour.”
Other Strategies For Paying Down Debt (That Don’t Involve Moving Out Of The Country)
The thought of paying down debt may feel incredibly overwhelming, but it’s all about taking it one day at a time. Simply fleeing the country isn’t going to make it go away. Be prepared to put your head down and do the hard work – the end result will be much more satisfying.
Looking for inspiration? Check out these other BrainyMoney articles on how to effectively pay off debt.
5 Strategies for Paying Down Debt