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I Now Live in the UK and Wonder if I Can Just Stop Paying My U.S. Student Loans? – Jason

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Question:

Dear Steve,

I’m currently living in the UK, and have been for the past 7 years. I have no intention of moving back to the USA as my wife is English and we have 4 kids together. The majority of my student loans were taken out to fund 2 Masters degrees here in the UK.

I owe $15,000 to American Education Services and pay $135 a month. Just this past year I consolidated other private student loans with CommonBond. That loan is now being serviced by First Mark, and I owe $62,000, and I pay $465 a month.

I also have $92,000 with Navient but it’s part of the Income Based Repayment Plan, so at the moment I’m not paying anything.

As an expat, what are the implications of defaulting on my loans with AES and First Mark?

I have no intention of living in the USA again, so having poor credit in the States means little to me in that sense.

The value of the pound has taken a hit, so I can’t afford those monthly payments by any stretch of the imagination. I couldn’t really afford them when the value of the pound was strong, and had to beg for money from my parents (which I can’t keep doing as they have their own bills to pay).

I can probably keep paying AES, but First Mark is simply too much for me to be able to pay. What should I tell them? Should I offer to pay a lower amount each month?

I just want to be as well-armed as possible – I’ve never had to make this type of call before and I don’t really know what to expect.

Thanks

Jason

Answer:

Dear Jason,

Well the reality is it sounds like no matter what you will have to default on the private loans. So let’s assume that is what will happen.

The U.S. based lender could always attempt to pursue you in the UK. It is a possibility but unlikely. However, they do know where you live in the UK.

You might be contacted by a debt collector or even sued in UK court if the company wants to go through all that bother.

The reality is it rarely happens.

One question people always ask is if this will impact their ability to come and go from the United States. Nope, it will not prevent you from coming and going.

There is no downside to staying on the IBR and annually recertifying for that income driven program. Continuing is a simple way to minimize hassle from the U.S. government over those loans. And eventually it can lead to them being forgiven.

Now you are already aware that defaulting will cause the loan to reported in default to the credit bureaus, the balance will grow, if there is any co-signer they will be pursued, and you could always be sued in the U.S. without you knowing it since they would serve an old or bogus address here.

All of that being said, defaulting does open the door to getting your loan into the right collection department down the line to workout a settlement or payment plan you can actually meet. You should read Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan.

There are also some interesting issues surrounding the school you went to and if it was a Title IV school approved by the U.S. Department of Education. You might also want to read this article.


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