• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

The College Investor

Student Loans, Investing, Building Wealth

  • About
  • Podcast
  • Research
  • Contact
  • Save For College
      • How To Start

      • How To Save For College
      • How To Pay For College
      • What Is the Average Cost of College?
      • What Is A 529 Plan and Where to Open One in Your State
      • How Much Should You Have In A 529 Plan By Age
      • How To Use A 529 Plan For Private Elementary And High School
      • What Are Qualified Expenses For A 529 Plan (And What Doesn’t Count)?
      • The Best Brokers To Open A 529 Plan
      • Tools + Accounts

      • 529 Plans: The Ultimate College Savings Plan
      • 529 Plan Contribution Limits
      • Prepaid Tuition Plans | What To Know
      • Understanding And Using 529A ABLE Accounts
      • Using A Roth IRA To Save And Pay For College
      • FAFSA Deadlines for Financial Aid
      • CollegeBacker Review
      • Upromise Review
      • UNest Review
      • Other Options

      • Student Loan And Financial Aid Programs By State
      • The Guide To Military And VA Education Benefits
      • How To Fill Out The FAFSA
      • How To Find College Scholarships
      • The Best College Scholarship Search Websites
      • How To Find Grants To Pay For College
      • Pell Grants: What They Are And How To Qualify
      • Understanding Federal Work-Study
      • How To Use A 529 Plan If Your Child Doesn’t Go To College
  • Student Loans
      • Borrowing

        • How Student Loans Work
        • How To Apply For A Student Loan
        • Best Student Loans And Rates In January 2023
        • 10 Best Private Student Loans Of January 2023
        • Best Student Loans To Pay For Graduate School
        • Best Student Loans To Pay For Medical School
        • Parent Loans To Pay For College
        • No-Cosigner Student Loan Options
        • Guide To Income Sharing Agreements (ISAs)
        • Best International Student Loans
      • Get Out Of Debt

        • Best Student Loan Refinance Companies In January 2023
        • Best Student Loan Repayment Plans
        • Best Student Loan Refinancing Bonuses And Promotional Offers Of January 2023
        • Student Loan Forgiveness Programs (The Complete List)
        • The Full List Of Student Loan Forgiveness Programs By State
        • Public Service Loan Forgiveness (PSLF)
        • Top Student Loan Scams
        • Average Student Loan Monthly Payment
        • Average Student Loan Debt By Year
      • Reviews

        • Credible Review
        • Splash Review
        • Ascent Review
        • Citizens Bank Review
        • Commonbond Review
        • Earnest Review
        • ELFI Review
        • Laurel Road Review
        • LendKey Review
        • SoFi Review
  • Investing
      • How To Start

        • How To Start Investing in High School
        • How To Start Investing In College
        • How To Start Investing In Your Twenties For 22 – 29 Year Olds
        • How To Start Investing In Your 30s For 30 – 39 Year Olds
        • How To Start Investing With $100 Or Less
        • How To Give Kids The Gift Of Stock
        • What Is Dividend Growth Investing
        • IRA Rollover Chart
      • Tools + Accounts

        • Best Online Stock Brokers
        • The Best Traditional And Roth IRA Accounts
        • The Best Robo-Advisors
        • The Best Investing Apps
        • The Best Places to Trade Options
        • The Best Places To Open A Health Savings Account
        • The Best Solo 401k Providers
        • The Best Self-Directed IRA Providers Of 2023
        • Best Cryptocurrency Exchanges
      • Reviews

        • Vanguard Review
        • Fidelity Review 2023
        • M1 Finance Review
        • TD Ameritrade Review 2023
        • Charles Schwab Review
        • Robinhood Review
        • Webull Review
        • Betterment Review 2023
        • Wealthfront Review
  • Earn More Money
      • Extra Income

        • 20 Best Side Hustles You Can Start Earning With In 2023
        • 53 Side Hustle Ideas To Make Money Fast
        • 100 Ways To Make Money In College
        • 80 Ways To Make Money From Home In 2023
        • 5 Quick Money Making Ideas (That Take Less Than 1 Hour)
        • 10 Interesting Ways You Can Make Money Driving
        • High-Paying Side Gigs That Earn $1,000 or More Per Month
        • The 10 Best Money-Making Apps
        • Paid Surveys: Earn Money For Giving Your Opinion Online
        • 10 Crazy Ways To Make $10,000 You’ve Never Heard Of
      • Build Wealth

        • 40 Passive Income Ideas You Can Use To Build Wealth In 2023
        • 3 Ways To Make $50,000 Per Year Without Working With Passive Income
        • How To Become A Real Estate Investor With Just $500
        • 15 Best Online Business Ideas
        • Residual Income: 7 Super Smart Ways to Build It
        • The Most Common Multiple Income Streams
        • How To Become A Real Estate Mogul With Only $10,000
      • Reviews

        • Fundrise Review
        • RealtyMogul Review
        • FarmTogether Review
        • AcreTrader Review
        • Swagbucks Review
        • Survey Junkie Review
        • TopCashback Review
        • DoorDash Review
  • Personal Finance
      • Banking

        • 10 Best High Yield Savings Accounts Of January 2023
        • 10 Best Money Market Accounts Of January 2023
        • 10 Best Free Checking Accounts In January 2023
        • Best Bank CD Rates Of January 2023
        • 10 Best Business Checking Accounts In January 2023
        • Best Online Banks Of January 2023
        • Best Credit Unions Nationwide Of January 2023
        • Best College Student Checking Accounts Of January 2023
      • Insurance

        • Best Life Insurance Companies
        • Renters Insurance
        • Car Insurance
        • Pet Insurance
        • Umbrella Insurance
        • Disability Insurance
        • Tuition Insurance
        • Travel Insurance
      • Credit Tools

        • Best Budgeting Apps
        • Cash Advance Apps
        • How To Get A Free Credit Score Report
        • Best Credit Monitoring Services For 2023
        • Debt Settlement: Inside The Secret World
        • Credit Repair Explained: Should You Pay For Help?
        • Best Personal Loan Companies And Lenders
        • Online Loan Companies To Borrow From Home
      • Tax

        • Best Tax Software
        • Free Tax Software
        • IRS Tax Refund Calendar
        • Common IRS Questions and Errors
        • Federal Tax Brackets
        • Capital Gains Tax Brackets
        • 401k Contribution Limits
        • IRA Contribution Limits
        • HSA Contribution Limits
  • Forum
  • Search
Home » Student Loans » Federal » Guide To Federal Student Loans For Expats

Guide To Federal Student Loans For Expats

Updated: December 13, 2022 By Mark Kantrowitz

Tweet
Share
Share
Pin
Email
Print

At The College Investor, we want to help you navigate your finances. To do this, many or all of the products featured here may be from our partners. This doesn’t influence our evaluations or reviews. Our opinions are our own. Any investing information provided on this page is for educational purposes only. The College Investor does not offer investment advisor or brokerage services, nor does it recommend buying or selling particular stocks, securities, or other investments. Learn more here.Advertiser Disclosure

There are thousands of financial products and services out there, and we believe in helping you understand which is best for you, how it works, and will it actually help you achieve your financial goals. We're proud of our content and guidance, and the information we provide is objective, independent, and free.

But we do have to make money to pay our team and keep this website running! Our partners compensate us. TheCollegeInvestor.com has an advertising relationship with some or all of the offers included on this page, which may impact how, where, and in what order products and services may appear. The College Investor does not include all companies or offers available in the marketplace. And our partners can never pay us to guarantee favorable reviews (or even pay for a review of their product to begin with).

For more information and a complete list of our advertising partners, please check out our full Advertising Disclosure. TheCollegeInvestor.com strives to keep its information accurate and up to date. The information in our reviews could be different from what you find when visiting a financial institution, service provider or a specific product's website. All products and services are presented without warranty.

federal student loans for expats

U.S. citizens are eligible for U.S. federal student aid regardless of where they live. This means that expats can qualify for federal student loans. 

But there are a few complications and opportunities when borrowing and repaying federal student loans for expats. 

Here's what you need to know if you're a U.S. citizen living abroad and you're hoping to take out federal student loans for yourself or for your children.

Table of Contents
Ways For Expats To Save For College
Federal Student Loans For Expats: How To Apply
Federal Student Loans For Expats: How To Repay
Income-Driven Repayment Loophole For Expats
Final Thoughts

Ways For Expats To Save For College

Expats can save for college in 529 college savings plans. Distributions are tax-free only if used to pay for qualified higher education expenses at colleges that are eligible for federal student aid. 

Qualified higher education expenses include tuition, fees, books, supplies, equipment, room and board (if enrolled at least half time), computers, internet access, and special needs expenses. Travel and transportation expenses, however, are not qualified higher education expenses. A 529 plan can also be used to repay up to $10,000 in student loans per borrower (lifetime limit). 

Expats are also eligible to claim the American Opportunity Tax Credit, Lifetime Learning Tax Credit and Student Loan Interest Deduction on their U.S. federal income tax return. 

Related: How To Save For College [The Best Order Of Operations For Parents And Families]

Federal Student Loans For Expats: How To Apply

To apply for financial aid, complete the Free Application for Federal Student Aid (FAFSA) based on the income reported on both the U.S. federal income tax return and the foreign income tax return being careful to not double-count any income. 

The U.S. federal income tax return has a foreign earned income exclusion that can shelter just over $108,000 of income earned in a foreign country. But the sheltered income must still be reported on the FAFSA. Foreign income should be converted to U.S. dollars using the exchange rate in effect on the date the FAFSA is filed. Exchange rates are published in the H.10 report on the Federal Reserve Board’s website. 

About 400 international colleges are eligible for U.S. federal student aid, in addition to thousands of U.S. colleges. However, students who are enrolled at foreign colleges may receive only federal student loans. They're not eligible for federal grants. Use the FAFSA’s Federal School Code Search to search for eligible foreign colleges. Specify Foreign Country, Canada or Mexico as the state. 

For help with the FAFSA, domestic students can call 1-800-4-FED-AID (1-800-433-3243). If calling from outside the U.S., the toll numbers are 1-334-523-2691 and 1-319-337-5665. The Federal Student Aid Information Center (FSAIC) also provides online chat and email functionality. A financial aid administrator at a participating college can also help students with their FAFSA and federal student aid questions.

Federal Student Loans For Expats: How To Repay

Making payments on a student loan can be challenging for expats. It's best to consolidate or refinance your student loans to simplify repayment, so that you have just one loan. (Borrowers should not refinance federal student loans into a private student loan, for reasons discussed in the next section.)

Update your contact information with the loan servicer, so that they have your foreign address, not just a U.S. address. This will reduce the likelihood of delays in contacting you. Nevertheless, international postal mail can be slow, so allow extra time before the deadlines.

Sign up for autopay as you will be less likely to be late with a payment if payments are transferred to the lender automatically from your bank account. (The main circumstance in which you might be late with autopay will occur when there are insufficient funds in the account.) Many lenders give a discount, such as a 0.25% or 0.50% interest rate reduction, as an incentive for borrowers to sign up for autopay.

Evaluate Your Banking Options

It is best to use an international bank that has branches in both the U.S. and your country, such as Chase, Citibank, or HSBC. Also consider a U.S. brokerage account with cash management features, such as the ones offered by Fidelity Investments and Charles Schwab. Online banks like Ally and Capital One may also be useful. Check whether the bank charges foreign transaction fees.

Otherwise, choose a local bank account that can be enabled for international fund transfer to a U.S. bank account. You may need to set up automatic transfers from your local bank account to the U.S. bank account, in addition to setting up the U.S. bank account for autopay to the loan servicer.

Pay Attention To The Exchange Rates

Beware of fluctuating currency exchange rates if your money is not in a dollar-denominated bank account. Confirm that the U.S. bank allows transfers in foreign currency.

You may need to transfer more than the loan payment amount to allow for changes in the exchange rate in addition to electronic transfer fees.

Related: Best Apps To Send Money (Domestic And International)

Stay Current On Your Federal Student Loans

Don’t default on your student loans. While it's more difficult for a U.S. lender to collect from an expat, they can get a court order to seize U.S. assets. The federal government can also garnish up to 15% of wages from U.S. employers, intercept federal income tax refunds, and offset up to 15% of Social Security benefit payments. 

Default can also affect your credit scores. If you default on a private student loan, the lender can seek repayment from the cosigners on the private student loan.

Income-Driven Repayment Loophole For Expats

Some expats repay their federal student loans using income-driven repayment plans because a loophole can yield a $0 monthly payment.

The monthly payment under an income-driven repayment plan is based on a percentage of discretionary income. Discretionary income is the amount by which adjusted gross income (AGI) exceeds 150% of the poverty line (IBR, PAYE and REPAYE) or 100% of the poverty line (ICR).

But if you file a U.S. federal income tax return, the foreign earned income exclusion shelters about $100,000 of income earned in a foreign country for taxpayers who reside outside the U.S. The foreign earned income exclusion is $108,700 in 2021, and is adjusted annually for inflation.

The foreign earned income exclusion is claimed on IRS Form 2555 and reported on line 8 of Schedule 1. This, in turn, is reported as an adjustment to income on line 10a of IRS Form 1040.
If your foreign earned income is less than the exclusion amount, your AGI might be zero. Note that unearned income, such as interest, dividends and capital gains, is not sheltered by the foreign earned income exclusion.

After 20 or 25 years in an income-driven repayment plan, the remaining balance will be forgiven.
Normally, the cancellation of debt is reported as income to the borrower on IRS Form 1099-C. This replaces the student loan debt with a smaller amount of tax debt. Taxpayers may be able to get the IRS to forgive the tax debt if they are insolvent (total debts exceed total assets). Otherwise, they might be able to negotiate an offer in compromise or get a 6-year payment plan.

The American Rescue Plan Act of 2021 provides tax-free status for all student loan forgiveness through December 31, 2025, including the forgiveness at the end of an income-driven repayment plan. This tax-free status may be extended or made permanent.

The income-driven repayment loophole may end at any time. The regulations for the income-driven repayment plans give the U.S. Department of Education the authority to require borrowers to provide alternative documentation of income if the U.S. Department of Education “believes that the borrower’s reported AGI does not reasonably reflect the borrower’s current income.” [34 CFR 685.209(a)(5)(i)(B) for PAYE, 34 CFR 685.209(b)(3)(i) for ICR, 34 CFR 685.209(c)(4)(i)(B) for REPAYE and 34 CFR 685.221(e)(1)(ii) for IBR]

Final Thoughts

The income-driven repayment plan loophole is not necessarily a good option if you plan on eventually returning to the U.S. Interest continues to accrue during an income-driven repayment plan, increasing the amount of debt. 

If you return to the U.S., your income will no longer be sheltered by the foreign earned income exclusion and your loan payments will increase. Depending on the specific income-driven repayment plan, the loan payments may be capped at the standard repayment amount or they might increase as income increases.

Some expats may be wondering if it would be worth it to refinance their students loans to a lower interest rate. If you're planning to pay your loans as agreed (in 10 years), this could make sense. But since private student loans don't offer income-driven repayment plans, you shouldn’t refinance your federal student loans if you want to use the expat loophole to have a $0 monthly payment.

Mark Kantrowitz
Mark Kantrowitz

Mark Kantrowitz is an expert on student financial aid, scholarships, 529 plans, and student loans. He has been quoted in more than 10,000 newspaper and magazine articles about college admissions and financial aid. Mark has written for the New York Times, Wall Street Journal, Washington Post, Reuters, U.S. News & World Report, MarketWatch, Money Magazine, Forbes, Newsweek, and Time. You can find his work on Student Aid Policy here.

Mark is the author of five bestselling books about scholarships and financial aid and holds seven patents. Mark serves on the editorial board of the Journal of Student Financial Aid, the editorial advisory board of Bottom Line/Personal, and is a member of the board of trustees of the Center for Excellence in Education. He previously served as a member of the board of directors of the National Scholarship Providers Association. Mark has two Bachelor’s degrees in mathematics and philosophy from the Massachusetts Institute of Technology (MIT) and a Master’s degree in computer science from Carnegie Mellon University (CMU).

Guide To Federal Student Loans For Expats

Editor: Clint Proctor Reviewed by: Robert Farrington

Editorial Disclaimer: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, or other advertiser and have not been reviewed, approved or otherwise endorsed by any of these entities.
Comment Policy: We invite readers to respond with questions or comments. Comments may be held for moderation and are subject to approval. Comments are solely the opinions of their authors'. The responses in the comments below are not provided or commissioned by any advertiser. Responses have not been reviewed, approved or otherwise endorsed by any company. It is not anyone's responsibility to ensure all posts and/or questions are answered.
Subscribe
Connect with
I allow to create an account
When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings. We also get your email address to automatically create an account for you in our website. Once your account is created, you'll be logged-in to this account.
DisagreeAgree
Notify of

I allow to create an account
When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings. We also get your email address to automatically create an account for you in our website. Once your account is created, you'll be logged-in to this account.
DisagreeAgree

0 Comments
Inline Feedbacks
View all comments

Primary Sidebar

Student Loan Resources

Featured Lender Reviews

>  Credible (recommended)
>  Splash (recommended)
>  ELFI
>  LendKey
>  Earnest
>  Laurel Road

Paying For College

  • Best Student Loans And Rates
  • Best Private Student Loans
  • Student Loan And Financial Aid Programs By State
  • Student Loans For Community College
  • Best International Student Loans
  • Best Student Loans For Graduate School
  • Best Student Loans For Your MBA
  • Best Student Loans For Medical School
  • How To Get A Private Student Loan With No Cosigner
  • How To Get A Student Loan With Bad Credit

Navigating Repayment

  • How To Select The Best Student Loan Repayment Plan
  • 5 Legal Ways To Lower Your Student Loan Payment
  • How To Use A 529 Plan For Student Loan Repayment
  • These Companies Offer Student Loan Repayment Assistance

Student Loan Forgiveness

  • Student Loan Forgiveness Programs (The Complete List)
  • Student Loan Forgiveness Programs By State
  • President Biden’s Student Loan Forgiveness Plan
  • Public Service Loan Forgiveness
  • Borrower Defense To Repayment
  • For-Profit College Student Loan Forgiveness List
  • Private Student Loan Forgiveness
  • Trade School Loan Forgiveness Programs

Student Loan Refinance

  • Best Student Loan Refinance Companies
  • Best Student Loan Refinancing Bonuses And Promotional Offers
  • Lenders That Offer Student Loan Refinancing Without A Degree
  • How To Refinance An International Student Loan
  • Best Medical School Student Loan Refinancing

More On Student Loans

  • Top Student Loan Scams
  • Does The Government Profit Off Of Student Loans?
  • Statue Of Limitations Laws For Student Loans
  • What Should You Do With Your Old FFELP Loans?
  • How To Get A Refund Of Your Federal Student Loan Payments

Footer

Who We Are

The College Investor is an independent, advertising-supported financial media publisher, focusing on news, product reviews, and comparisons.

Connect

  • Contact Us
  • Advertise
  • Press & Media

About

  • About
  • Our Team
  • Podcast
  • Editorial Guidelines
  • How We Make Money
  • Archives

Social

Copyright © 2023 · The College Investor · Privacy Policy ·Terms of Service · DO NOT Sell My Personal Information

wpDiscuz