Debt-fighting expats find success abroad

They pay off loans faster by moving to a country with lower cost of living

Adventure seekers find debt relief by moving overseas Rob Goebel, Lana Kotioukova/
Adventure seekers find debt relief by moving overseas Rob Goebel, Lana Kotioukova/


A rising number of Americans are moving abroad to be done with debt. They're not leaving as debt dodgers, relocating to avoid debt collectors or sidestep lawsuits. Quite the contrary. Fiscal adventurers are taking advantage of the global economy and modern connectivity to dramatically reduce their cost of living, pay off debt and build savings.

The exact number of Americans living the expatriate lifestyle is hard to determine since the U.S. government doesn’t track citizens who leave the country. A 2013 study by the Migration Policy Institute, a Washington, D.C., nonprofit think tank, estimated range between nearly 2.2 and 6 million. According to the study, “Counting the Uncountable, Overseas Americans,” there is “broad agreement” that the largest number has moved to Canada and Mexico, with large contingents also settling in the United Kingdom, France, Germany and Israel.

Sherry Tetreault, a credit counselor with ClearPoint Credit Counseling Solutions, finds this trend is especially pronounced among retirees. “You will find individuals considering these options. Most like the fact that they won’t have to pay taxes on some of their income or assets,” she says via email.

Saving in Mexico, Colombia
Tim Leffel, a former expat, was able to stretch his income after immigrating to Guanajuato, a city in central Mexico. The travel writer and author of “A Better Life for Half Price” practiced what he preached and reduced his credit card balance by $40,000 in just two years. The progress has slowed since returning to Tampa, Florida, while his daughter attends high school. But he’s still benefiting from having experienced a couple of years of relief from the financial pressures back home. “Your expenses are basically cut in half. Everything was cheaper except for imported goods,” he shared.

Your expenses are basically cut in half. Everything was cheaper except for imported goods.

— Tim Leffel
Former U.S. immigrant to Mexico

Joseph Hogue also found freedom from credit debt quickly when his family landed in Medellin, Colombia. Hogue, an investment analyst and personal finance blogger with, paid his wife’s $2,000 credit card balance off in the first two months after arriving.

His monthly living expenses for a family of three tops out at just under $1,000. “We’re able to save so much here that we can pretty much do what we want,” Hogue says, when asked about possibly returning to his hometown in Iowa.

Establishing credit in these Latin American countries hasn’t been necessary for either Leffel or Hogue, since both Mexico and Colombia are primarily cash-based societies. Both men use their U.S. credit cards on rare occasions, mostly when shopping online. Leffel suggests that Americans maintain a U.S. based address because, “It’s hard to apply for a new card or new account if you have a foreign address. Most expats we knew used a mailbox service out of Laredo, Texas. Mail is driven overland down through Mexico so they can keep a U.S. address.”

Teaching English abroad drew Charlotte Edwards from Wisconsin to China with an eye on repaying student loans. She ultimately paid off $14,000 in student loans over three years. During that time, she met her husband – a Chinese national – and has remained in her adopted home for the past 10 years.

Income taxes
Edwards is now a freelance writer and plans to return to the United States. Like other American expats, the income she earns while living overseas is subject to not only local taxes but also U.S. taxes. However, thanks to the Foreign Tax Credit and the Foreign Income Tax Exclusion, the Internal Revenue Service takes into account local taxes paid and even then, it cares only about income above a certain level.

John McCarthy, a CPA and president of McCarthy Financial Planning, works with Americans who have moved overseas. He said, “For 2016, you can exclude up to $101,300 of income that you earn while you’re outside of the United States.” This helps those most who move to non-European countries that have a much lower income tax rate than we do.

McCarthy warns that American citizens living abroad should always file a U.S. tax return regardless of their income source. “You’re staking your claim to the IRS that you can take the benefit of that income exclusion by filing the return. If you don’t file that return, the IRS can come back and tax the entire amount of income.”

Amazing progress while living in Asia
Spending a year in South Korea was a financially savvy move for Vanessa Page. The Canadian national was able to pay off CA$28,000 (US$21,641 using the exchange rate on June 4, 2016) in student loan debt in just one year by working overseas. The school paid for her roundtrip plane ticket and housing, and provided a bonus equal to one month’s salary after completing her one-year contract. “During that year, you basically have no expenses, except for food or if you go out or trips,” she says.

We’re able to save so much here that we can pretty much do what we want.

— Joseph Hogue
American living in Colombia

Likewise, Gabby Wallace wiped out $22,000 in student loan debt while teaching English in Tokyo. Wallace, a Boston native and CEO of Go Natural English, acknowledged that Tokyo’s cost of living is comparable to some of the more expensive cities in the U.S. Still, she was able to capitalize on the strength of the U.S. dollar and employer-subsidized housing to eliminate her student loan debt in one year.

Wallace now lives in Rio de Janeiro, Brazil and, like Leffel and Hogue, maintains U.S. credit accounts rather than dealing with the intricacies of establishing credit in a foreign country. Her advice for people considering moving overseas: “Make sure that your credit card does not have any foreign transaction fees. There are several options available and you can check that beforehand.”

Caution against dodging debt
A few words of caution if you’re thinking about fleeing the country to avoid dealing with debt: Don’t do it.

Rae Kaplan, a student loan attorney with Kaplan Bankruptcy Law Firm, reminds borrowers that, “You’re not really escaping. Since there are ways to keep your debt under control, leaving the country is the worst way to deal with it.” Kaplan encourages student loan borrowers to work through agreements with their loan servicers, look into income-based repayment options, and also consider Chapter 13 bankruptcy protection. While bankruptcy will not eliminate your student loan debt, it can offer relief from any garnishments and some flexibility with your payments temporarily – giving you time to bounce back financially.  

Kaplan also warns that those fleeing to avoid repaying debt will be unloading a financial burden onto someone else if a co-signer is involved. “If you disappear and [the creditors] are unable to garnish you, they will go after the co-signer, who is most likely a parent or some other relative. Your family will be hit by your decision pretty hard,” she says.  

Johnetta Paye, founding partner of the Chicago law firm J. Paye & Associates, highlights another downside to dodging debt. Borrowers who leave the country and default on loans get pulled into a complicated web of legal madness. Lenders “can do such things as go to court to accelerate the debt that’s due,” she says. “Now you have to pay the entire amount plus court costs plus legal fees.”

Dodging debt creates more problems than it resolves. Take a page from the book of one of these fiscal adventurers if you’d like the thrill of living overseas. Seek out a locale with a lower cost of living. Save money and pay your way out of debt – the right way – and be done with debt for good.

See related: Moving abroad? 7 tips from a perpetual nomad, 5 credit mistakes expats should avoid

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Updated: 01-16-2018