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Why not leave country and bail on student loans?

By

To Her Credit
To Her Credit, Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs. See her website SallyHerigstad.com for more personal finance tips and free budgeting worksheets.
Ask Sally a question, or read her previous answers in the To Her Credit archive
Question for the CreditCards.com expert

Dear To Her Credit,
One reads about people who have insurmountable debt problems, especially student loans. Why not simply move to Canada or Abu Dhabi and start a new life there? You are not going to have any kind of life here.
-- Wendy

Answer for the CreditCards.com expert

Dear Wendy,
Why not? Other than family and friends, immigration requirements, love of country and a bit of inconvenience, I suppose there's no reason a person shouldn't move to another country and leave their debts behind.

But it's completely unnecessary.

I know things have been tough. Recent graduates have to contend with both the highest levels of student loan debt ever, thanks to insanely high tuition costs and a difficult job market. Many of them feel as if they were promised that if they just stayed in school, no matter the cost, they'd be rewarded with a job with high pay when they were done.

Instead, college graduates often end up working outside the field they trained for, making wages a lot closer to minimum wage than to the salaries they'd hoped for. Even young adults who get the jobs they wanted can discover that their paychecks don't go far. By the time they pay taxes, it's hard to make those student loan payments.

Thus, the temptation to run away to Canada or Abu Dhabi. I wouldn't even know how to move to Abu Dhabi -- especially if I was short on money. I could get to Canada on half a tank of gas, but staying there may be harder. The best option for staying legally in Canada is on a Skilled Worker Visa, which requires people to prove that they have a high level of skills that are needed in Canada.

There's no guarantee a collector won't try to make debtors pay even after they move to another country, either. It will be much more expensive to collect from across the border, but a debtor may find herself still looking over her shoulder at debt that isn't really going away. 

Some people do move to another country to escape debts. For most of us, it isn't that easy or practical, however. People in such situations may want to look at some more realistic options, such as:

  • Asking for a longer-term loan, or a loan with lower payments during the early years when you are establishing your career.
  • Asking for forbearance if you cannot pay anything; for example if you are unemployed and have no income.
  • Seeing if you qualify for a repayment plan based on your income. Under this type of plan, payments shouldn't be more than you can afford, based on program calculations.
  • Working in a field, such as teaching or military service, that allows you to have your balance erased after a certain number of years. Working in some special needs areas allows some people to have their loans erased completely.
  • Considering bankruptcy if you have significant other debts. You aren't likely to have your student loan erased in bankruptcy, but by losing other debts, you may free up money to make student loan payments and still pay your bills.

For more information on repayment options, visit the U.S. Department of Education Office of Federal Student Aid.

The best solution, of course, would be for graduates to reach for and achieve the career and financial success they hoped for when they decided to go to college.  Success may look different or take longer than they thought it would. People who refuse to give up, and who go over, under or around every obstacle in their path, can still find a way to resolve or pay their student loans -- and they can definitely create a worthwhile life for themselves here.

See related: Repayment options grow for student loan borrowers, How to move student loans out of default

Meet CreditCards.com's reader Q&A experts
Vexed by a personal finance problem? CreditCards.com's Q&A experts answer questions from readers every weekday. Ask a question, or click on any expert to see their previous answers.
Gary Foreman, New Frugal You columnist Gary Foreman,
"New Frugal You"
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"To Her Credit"
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"Cashing In"
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Erica Sandberg, Opening Credits columnist Erica Sandberg,
"Opening Credits"

Published: July 5, 2013



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