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Sorry, they don’t go away! How to repay your student loans when living abroad
Moving abroad but still got a student loan to pay? No sweat. Follow these steps to ensure you don’t default.
26 novembre 2020 — 7 min read
Phew! You’re done with college at last. It was hard, but it was worth it.
You decide to travel the world or to go work in another country. You want to experience a new culture and lifestyle.
But as you pack your bags, there’s something at the back of your mind: your student loan. What will happen to it? Will the debt go away? Can you pay it when living abroad?
No, unfortunately the payments won’t disappear when you leave the country.
Yes, you can repay your student loan from overseas—and it’ll be easy.
This post outlines the exact steps you need to take to pay your student loan when living abroad, along with your best options for repaying your student loan as you live abroad (hint hint, it’s Xe).
How to repay your UK student loan when living abroad
1. Notify the Student Loans Company (SLC)
If you plan to move abroad temporarily or permanently, contact the Student Loans Company to let them know. Moving away doesn’t excuse you from paying your student loan. Also, let the SLC know how to get in touch with you when you’re abroad.
If you don’t provide all the information required by the SLC, you may get charged a fixed amount that’s higher than the repayment amount due. You may also be required to pay the full loan amount, including interest and penalties, in one lump sum.
However, if you'll be away for less than 3 months, you don’t need to notify the SLC, because you’ll still be considered a UK taxpayer.
2. Fill out the Overseas Income Assessment Form
The SLC will ask you to complete an Overseas Income Assessment Form, providing details of your employment status and income. You must be detailed because you’ll be making loan payments directly to the SLC and not through your employer.
When you live in the UK, repaying your student loan is automatic as Her Majesty's Revenue and Customs (HMRC) deducts the money from your paycheck if you don’t pay the right amount. But once you move abroad, HMRC can’t do this. That’s why you have to get in touch with SLC.
The Overseas Income Assessment Form is only valid for 12 months. You must fill in another form if the year ends and you’re still living abroad.
3. Provide evidence
The evidence you’ll provide will depend on what you’ll be doing abroad. We’ve summarized some of the evidence required below, but you can find out the exact details from the SLC.
If you're...
Employed. The SLC will require your payslips for 3 months and a signed and dated copy of your employment contract.
Self-employed. If you’re self-employed, you’ll have to provide a bank statement showing your gross annual income.
Traveling. You will have to send your travel itinerary to the SLC. You’ll also need to provide bank statements showing the money you’re living off.
Studying. You must provide evidence that confirms you’re studying, like a grant letter, a student card, or a loan agreement. The SLC doesn’t accept a university offer letter.
Volunteering. The organization you’re volunteering with should give you a letter indicating the amount of support it is giving you.
Unemployed. You must provide evidence showing the benefits you receive.
Living off your savings. You’ll need to provide bank statements which prove this.
Supported by someone else. You’re required to fill out the Third Party Declaration section of the form. You must also provide your bank statement.
If you don’t provide the necessary information, your loan will be charged Retail Price Index (RPI) plus 3%. If the SLC is satisfied with the information you’ve provided, you'll get a repayment schedule showing if you have any repayments due and how much your monthly payments should be.
How much will you pay?
When living abroad, you'll pay 9% of your income over the repayment threshold for that country. Because of differences in the cost of living, the repayment threshold may differ from the UK threshold. To incorporate price changes, the SLC updates its threshold each year.
You will only be required to repay your loan if your income is above the repayment threshold. The current UK threshold is £511 a week, £2,214 a month, and £26,575 a year.
To calculate your income in sterling pounds, the SLC uses the average exchange rate from the previous year. This helps the organization to determine your loan repayment schedule. If your income changes significantly, you can reapply for assessment.
How to repay your U.S. student loan when living abroad
Living outside of the U.S. can be an amazing experience. However, you may face challenges when it comes to repaying your student loan. Since you can’t escape the loan when you move, you must find out how you’ll be repaying it before you pack your bags. Here’s what you need to do.
1. Give your loan servicer your contact info
You can log into your loan account online and update your contact information: your phone number, address, and email address. Alternatively, you can contact your loan provider and speak to a representative directly.
2. Set up autopay
This is the best way to ensure you never miss a loan payment. You can quickly set up autopay by logging into your account on your loan provider’s site. You’ll have to provide the name of your U.S bank, the routing number, and your account. Most loan servicers give a 0.25% reduction on the interest rate to those who set up autopay.
3. Use Xe for money transfers instead of an international bank
When living abroad, you’ll probably be using a local bank instead of a U.S. bank, because some banks are only limited to the U.S. Banks charge high fees for wire transfers: even global banks like CitiBank and Chase. Xe makes it easier to repay your student loan. You’ll get a great money transfer rate for your chosen currency.
4. Don’t default on your student loan
When you move abroad, life may become so exciting that you get tempted to disregard your student loan. But defaulting on your loan may have long-term consequences that may be difficult to undo. It can completely ruin your credit score and the government can garnish your wages. You may also face severe financial setbacks when you move back to the U.S.
How can you repay your student loan when living abroad for 5 years?
Much like paying overseas tuition fees, you have several options for paying overseas student loans. And just like your options for paying international tuition, some are better than others.
Use Xe
Student loans can get expensive. At Xe, we want to ensure you save money when you’re repaying your U.S. or UK student loan. We use competitive rates for international money transfers and you’ll see how much you’re sending upfront. Once you sign up, you can start sending money easily and quickly, and you’ll always know exactly what you’re paying before you hit “confirm”.
Direct debit
One of the quickest ways to repay your student loan when living abroad is via direct debit. You can retain your UK or U.S. bank account and set up a direct debit to make regular payments to the SLC or the U.S loan servicer. To avoid penalties, ensure there’s a continuous flow of money to the account. However, you will pay a substantial amount of cash for international money transfers as well as currency conversion fees.
Credit card
This is a good option when you need to repay your student loan quickly. However, you have to find out if the loan provider accepts credit card payments because not all do. You may also pay a lot of money in fees when repaying the loan.
International wire transfer
This payment process may be easier if your bank has international branches. You can open a bank account with the same bank when you’re abroad. To repay your student loan, you’ll need to transfer the money to your bank account back home before making the payment. But you’ll have to factor in time delays and the extra fees tied to international bank transfers.
In short?
We know, you might not be excited to repay your student loans. But if you use Xe for your international money transfers, you can rest assured knowing that you can send money from around the world and that you’re getting a great exchange rate for your transfer. Learn
more now!