The Facts: What Happens if You Leave the U.S. with Outstanding Student and Private Debt
The decision to move out of the United States can have significant implications on financial obligations, including student and private debt. Here, we explore the realities of leaving the U.S. with balances due on student loans and private debts, and the strategies you might employ to navigate such a situation.
Leaving as a Student and the Impact on Student Loans
One unconventional approach to avoiding the burden of student loans is to continue attending college indefinitely, thus maintaining your student status and staying in deferment. At a 2-year college, you can essentially continue to be a student for most of your life, which may allow many of your student loans to stay in deferment. However, this approach comes with limitations and is not a practical long-term solution.
Dealing with Private Debt Abroad
When it comes to private loans, the process is different. To collect from you, private lenders would need a judgment obtained through legal proceedings. If they cannot serve you personally, the statute of limitations would eventually expire, and they would be unable to collect. Typically, this process can take several years. In some cases, lenders can renew the judgment for an additional 10 years, but only if they are able to get the judgment initially.
Regarding student loans, these do not automatically discharge in the same way as private loans. While there are procedures to discharge them, success rates are often low. Student loans usually do not have a statute of limitations, but after 7 years, the debt falls off credit reports. In practice, old student debt is not aggressively pursued anymore due to the aforementioned reasons.
The Challenges of Fleeing the U.S.
Leaving the United States with outstanding debt does not solve all your problems. If you move abroad with balances due on your student loans, you will still need to continue making payments. Paying from a foreign account may incur fees, and it might be more practical to maintain a U.S. account to make the payments.
Private lenders would likely find you at some point if you stop making payments. The world is highly interconnected, and it would be extremely difficult to completely disappear. Fleeing to another country, especially if you do not plan on returning, could offer some protection against seizure of assets or court action. However, leaving the country and accumulating significant debt can often lead to more complex financial and legal issues.
Conclusion and Final Thoughts
Leaving the U.S. with significant debt is not a straightforward solution. In reality, the IRS and U.S. courts will only have jurisdiction over you while you are within U.S. soil. Once you leave, they cannot force you to pay your debts, though they can continue to claim that you owe money. Essentially, money is only valuable because people believe in it, and if you choose not to pay, it's on the creditors to accept that loss.
In some cases, fleeing abroad, changing your name, and adopting a model where education is free (like in Finland) might seem like a radical solution. However, it is essential to consider the broader implications such as the difficulty in starting over in a new country and the potential life-changing decisions this might entail.
Ultimately, while it is possible to leave with debt, it is crucial to weigh the pros and cons carefully. Education and financial obligations are deeply intertwined, and finding a way to manage both is often the best long-term solution.