Question:
Dear Steve,
Owe over 65, 000 in Private Student loan debt…..and about 62,000 more in federal debt. I immigrated to Europe about 10 years ago and now have citizenship in my new country of residence. I have been paying my private student loan company whatever I could afford but they put my loan in default anyway.
Should I even bother paying them anything at this point? I was misled in college, I was actually told by one of the financial advisors that the Private Student Loan company would work with me…if I could only afford to pay $10 then I could just pay that….but that isn’t how it works.
I have no property in the US anymore currently although I may inherit money and property in the future.
What is my best bet of protecting this future inheritance…should I file for Bankruptcy? Can I file for Bankruptcy given that I am not currently resident in the US? What is my best option?
Vance
Answer:
Dear Vance,
Your situation comes down to more of a real solution rather than a best-case solution.
The financial advisor in school that told you it would be okay to pay what you can just afford to pay, was an idiot.
Make sure you have your federal student loans on an income-driven repayment program so you keep those out of default since you may still have to file a U.S. tax return on foreign income and if, by chance you were eligible for a tax refund, you would not want it intercepted. Same applies if you would ever be eligible for any Social Security benefits. You would not want those garnished by a federal student loan default.
On the private loan front, it does not seem trying to be clever is an option because the bottom line is you just can’t afford to make payments on it.
Since private student loans do not have income-based repayment options you either make the contractual payments or you wind up in default.
There is little to no international collections on private student loans so the chance of you being pursued in your new EU country is slim to none.
Defaulting on your private student loans would not prevent you from reentering the United States.
Since you are no longer a resident of the U.S. you would not be eligible to file bankruptcy back home without establishing some sort of residency. You’d have to discuss those requirements with a licensed bankruptcy attorney from the state of your residence.
Regarding the inheritance, the likely outcome would be you would inherit some money and then move it out of the U.S. and this would most likely happen before the private student loan lender took any action.
I rather see people resolve the financial problems that just ignore them, when possible. If you had any access to funds or could make a payment of $250 a month towards a reduced balance on the private student loan, it may be entirely possible to settle the balance for less than you owe rather than just ignoring it. Only you know what funds you have available on a consistent monthly basis to direct towards the private student loans.
