I’m a U.S. Resident Living in New Zealand With U.S. Student Loan Debt. – Tess

“Dear Steve,

I have a BS in Psychology from the University of Texas at Arlington and am just now finishing up my medical degree from the University of Auckland in New Zealand. (Finish Nov 9)

I ended up taking out some private loans during my undergrad as my parents were against PLUS loans, and I was paying for everything myself. I have about 23,000 in private loans now (since interest has been accumulating for the past 5 years of my medical degree).

In terms of federal loans, well, that equates to $400,000…but I have my degree!? My undergrad I came out with about 35,000, but the sheer cost of medical school has significantly elevated the debt. On top of that, I didn’t have the ability to work, so more had to be taken out for cost of living.

I’m living overseas and don’t have any income they can base consolidation of private loans on as I am about to FINALLY start working in November, but the work is in New Zealand. While many have told me, I should just run away from the debt because I don’t want to work in the states, it is dishonest, and as a doctor, I feel I need to take the moral high ground. Is filing for bankruptcy an option for me?

How the heck do I go about this? With the private loans, I obviously want to pay those off as quick as possible and really want to know a way I can consolidate without having to work for a year so that I can prove I’m making some money…otherwise the interest is just going to keep on coming.

I’ve looked at personal loans here in NZ to try and just do a one-off payment, but the interest rates on those suckers are 15%. Oh, and since I’ve been in school since basically 1982, I am currently already paying down the interest on the private loans monthly because I exhausted the maximum deferment period. That’s already $150, and my federal loans are looming to kick in in May.

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With the federal debt, I was thinking income based contingency plan may be best as I think it’ll work out that I just end up paying the debt I owe without the interest since there is SO much of it and 25 years is a REALLY long time. Thoughts on this one? I won’t be making much the first few years and will be only working part-time after that to take care of kids for a while. I figure that gets me through the first ten years?

Let me know if you need further information. I know exactly how confusing my situation is.


Dear Tess,

Congratulations on graduating and living in New Zealand. It’s a place I would love to visit in my life.

On an additional note, this year I learned how difficult it has become for out-of-country medical school graduates to get a suitable residency in the U.S. so they can eventually practice medicine in the U.S. By some estimates there is a 25% shortage is residency slots and people who now are the hook for medical school loans are not able to become a doctor.

On the private loans, they are what they are. They will want payment and the only options will be any plan the private lender offers.

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On the federal student loans there are actually colleges out of the U.S. for which you can get U.S. federal student loans. I don’t know if your school was on the list.

You will need to apply for and qualify annually for and federal income based repayment programs.

The reality on the private loans is if you can’t afford them and they are unwilling to workout a suitable payment arrangement you might just have to let them default. It is unlikely today that you would be chased in NZ over the loans.

Your statement about the moral ground is interesting. It is certainly not a black and white issue. If the loan is the more important thing to deal with then walk out of school today and get a job making money to make payments. But if the goal is to finish what you started and graduate from medical school, then focus on that and deal with the rest.

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This is not a moral issue but a priority and logic issue.

Please post your responses and follow-up messages to me on this in the comments section below.

Damon Day - Pro Debt Coach

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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