Douglas Olsen
Student loan forgiveness for international students or those working abroad is possible but often complex and nuanced. The type of loan, the nature of employment, and the location of the company distributing paychecks are some factors that determine eligibility for loan forgiveness. Federal student loans are typically only available to citizens or eligible non-citizens, and refinancing federal loans can disqualify borrowers from forgiveness programs. Private student loans are even more challenging to navigate, as there are no official forgiveness programs. However, borrowers can explore options like loan deferment or have honest conversations with lenders to work out suitable repayment plans. For federal loan borrowers working abroad, the Foreign Earned Income Tax Exclusion might allow them to report low or no income, resulting in lower payments contributing toward IDR forgiveness. Additionally, certain government or nonprofit entities qualify for PSLF, and overseas assignments with the Peace Corps or U.S. State Department may count as qualifying employment.
| Characteristics | Values |
|---|---|
| Possibility of loan forgiveness for international students | Difficult but possible |
| Federal student loans for international students | Only available to citizens or eligible non-citizens |
| Types of federal student loans | Perkins loans, direct loans, and FFEL program loans |
| Student loan forgiveness for private student loans | No official programs, complete forgiveness unlikely |
| PSLF eligibility while working abroad | Possible, but the company distributing paychecks must be a U.S.-based eligible nonprofit or government entity |
| PSLF qualifying employment examples | Peace Corps or U.S. State Department overseas assignment |
| Impact of moving abroad on student loan payments | Required to continue making monthly payments; moving overseas may help repayment in some cases |
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What You'll Learn
International work: PSLF criteria and qualifying employment
International work can qualify for Public Service Loan Forgiveness (PSLF), but there are specific criteria that must be met. Firstly, it is important to understand that PSLF only applies to federal student loans, and borrowers must have direct loans (or consolidated federal loans).
For international work to qualify for PSLF, the organisation that employs you must meet the program's employer criteria. Generally, this means working for a U.S. government entity or a nonprofit organisation. The key consideration is that the company that distributes your paychecks must be based in the U.S. and be an eligible nonprofit or government entity. For example, a Peace Corps or U.S. State Department overseas assignment would count as qualifying employment. The Department of State's Foreign Service Specialist Benefits overview explicitly mentions that employees are eligible for PSLF.
If you are working internationally, or considering doing so, it is important to understand the nuances of PSLF eligibility. While it is not impossible to attain PSLF while working abroad, it may be more complex and challenging.
Additionally, if you are a federal loan borrower working abroad, you may want to consider enrolling in an income-driven repayment (IDR) plan. Through the Foreign Earned Income Tax Exclusion, you may be able to report low or no income, which could result in lower payments that count toward IDR forgiveness. It is crucial to sign up for an IDR plan with your loan servicer and complete the necessary paperwork. However, refinancing federal loans into private loans should be approached with caution, as it would make you ineligible for PSLF and other federal loan benefits.
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Federal loans: IDR plans and reporting low income
If you have federal loans, you may be able to enroll in an income-driven repayment (IDR) plan. This can be done online through the U.S. Department of Education's IDR plan enrollment website, or by contacting your loan servicer directly. IDR plans allow you to make lower monthly payments based on your income and family size.
There are several types of IDR plans, including the newest plan, the SAVE Plan, which replaced the REPAYE Plan in 2023. The SAVE Plan lowers payments compared to other IDR plans because your payments are based on a smaller portion of your income. Another option is the Income-Based Repayment (IBR) plan, which caps your payment amount at a certain percentage of your discretionary income or the amount you would pay under a standard repayment plan. The percentage rate depends on when you took out the loan and your existing federal student loan balance.
If you have FFEL loans and want to pursue Public Service Loan Forgiveness (PSLF), you will need to consolidate your FFEL loans into a new Direct Consolidation Loan and then enroll in an IDR plan. It is important to note that Parent PLUS Loans or Direct Consolidation Loans that paid off Parent PLUS Loans are not eligible for PAYE or SAVE.
When considering an IDR plan, it is essential to understand that your monthly payment will be based on your income and family size. You must recertify your income and family size each year, even if there have been no changes. Additionally, if you are married, your spouse's income and student loan debt will not be considered if you file your taxes separately.
If you are working internationally, it is still possible to pursue PSLF while employed abroad, although it may be more complex. To qualify, you must be employed by a U.S.-based company that is an eligible nonprofit or government entity. For example, a Peace Corps or U.S. State Department overseas assignment would count as qualifying employment. By enrolling in an IDR plan and utilizing the Foreign Earned Income Tax Exclusion, you may be able to report low income and make lower payments toward IDR forgiveness.
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Private loans: refinancing and lower interest rates
Private student loans are typically provided by banks and financial institutions, and the terms and requirements can vary. A strong credit score will increase your chances of getting approved and may help you secure a lower interest rate. Additionally, a co-signer may help you obtain better terms.
Refinancing is an option for those with existing loans to take out a new loan with a lower interest rate. This can help lower overall interest costs. However, refinancing federal loans with a private lender means forfeiting federal protections and benefits, such as income-driven repayment plans and loan forgiveness options.
When considering refinancing, it is recommended to compare offers from multiple lenders. Tools like Credible allow students and parents to compare prequalified rates from various lenders without impacting their credit.
It is important to carefully evaluate the risks of refinancing federal loans. Losing access to benefits such as income-driven repayment plans, forbearance, and loan cancellation can have significant implications. For example, an income-driven repayment plan can be beneficial when moving back to the US.
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AmeriCorps and Peace Corps: qualifying for PSLF
While it is possible to qualify for Public Service Loan Forgiveness (PSLF) while working abroad, it can be more difficult and nuanced. To qualify for PSLF, you must be employed by a U.S.-based organisation that meets the program's criteria, typically a U.S. government entity or nonprofit organisation. For instance, a Peace Corps or U.S. State Department overseas assignment might count as qualifying employment.
For AmeriCorps and Peace Corps volunteers, there are a few routes to receiving PSLF credit for your service. One option is to apply for an economic hardship deferment or forbearance for the duration of your service commitment. During your service terms, you won't have to make any payments, but you will need to use your transition payment or the Segal AmeriCorps Education Award to make a lump-sum payment on your Direct Loans after completing your service. However, there are limitations to this method, including the requirement to make the lump-sum payment within six months of receiving your transition payment or education award, and the limit of receiving up to 12 PSLF-qualifying payments, even for longer periods of service.
Another option is to enrol in an income-driven repayment (IDR) plan, which will significantly reduce your monthly payment and directly count toward PSLF. As a volunteer, your income will likely be very limited, so you may benefit from paying only 10% to 20% of your discretionary income each month, or even qualifying for a monthly payment as low as $0 depending on your income and family size. Unlike the deferment or forbearance option, which is limited to 12 months, you can receive full PSLF-qualifying payment credit for the duration of your service commitment with an IDR plan.
It's important to note that to be eligible for PSLF through AmeriCorps and Peace Corps service, you must serve full-time as an AmeriCorps VISTA volunteer and have Direct Loans under a qualifying repayment plan. Additionally, if you don't plan to work for a PSLF-qualifying employer after your service, you can continue making low monthly payments on an IDR plan to be eligible for loan forgiveness after 20 to 25 years, although this type of loan forgiveness is taxable.
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Loan forgiveness: qualifying repayment plans
Public Service Loan Forgiveness (PSLF)
PSLF is a program that forgives the remaining balance on your Federal Direct Loans after you have made 120 qualifying monthly payments while working full-time for a qualifying employer. Qualifying employers include government organisations and certain non-profit organisations. A Peace Corps or U.S. State Department overseas assignment might count as qualifying employment. To qualify, you must have Direct Loans or consolidated federal loans.
Income-Driven Repayment (IDR) Plans
IDR plans are available for borrowers with federal student loans and can potentially help those working abroad. Through the Foreign Earned Income Tax Exclusion, you might be able to report low or no income, and have low or no payments count toward IDR forgiveness. Only federal student loans managed by the Department of Education (ED) qualify for the one-time IDR adjustment.
On April 19, 2022, the ED announced changes to bring borrowers closer to forgiveness under IDR plans. Any month spent in repayment, some deferment periods (before 2013), and some forbearance periods will now count toward loan forgiveness. For some borrowers, these changes mean that their loans may immediately qualify for forgiveness if they have been in repayment for more than 20 or 25 years.
Student Loan Refinancing
If forgiveness is not an option, refinancing your student loan might help you lower your interest rate if you are eligible. However, if you have federal loans, refinancing may not be the best option as you will no longer qualify for PSLF, IDR, forbearance, or loan cancellation through any program.
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Frequently asked questions
It depends on the type of loan and the nature of your employment. Generally, any U.S. government entity or nonprofit organization will qualify for PSLF. If you are employed by a U.S. government entity or a qualifying nonprofit organization, and the company that distributes your paychecks is based in the U.S., then you may be eligible for PSLF while working abroad.
PSLF stands for Public Service Loan Forgiveness.
To qualify for PSLF, you must have Direct Loans (or consolidated federal loans) and work full-time for a government or not-for-profit organization.
Yes, if you have federal loans, you may be able to take advantage of the Foreign Earned Income Tax Exclusion. By reporting no or low income, you can have no or low payments count toward IDR (Income-Driven Repayment) forgiveness.
IDR stands for Income-Driven Repayment. It is a repayment plan for federal student loans that is based on your income and family size.
