Lana Oconnell
Student loan debt doesn't disappear when you move abroad, and in some cases, it can be more complicated to manage. The amount you repay while living abroad will be the same as it would have been in the UK, but converted into the equivalent amount of money for the country you're living in, taking into account factors such as the cost of living and average salaries. It's important to notify the Student Loans Company (SLC) of your income and employment status, as well as any changes, to avoid penalties and ensure you're paying the correct amount. Depending on your income, you may be able to take advantage of payment relief options, such as the Foreign Earned Income Exclusion if you're a U.S. citizen. To make payments easier, it's recommended to set up automatic payments from your bank account and consider opening an account with an international or global bank to avoid foreign transaction fees.
| Characteristics | Values |
|---|---|
| When to start repaying | When your income goes above the Student Loan repayment threshold |
| Repayment amount | 9% of your total earnings over the threshold |
| Repayment threshold | Depends on the country of residence, cost of living, and average salaries |
| Repayment while unemployed | Not required, but evidence of unemployment is necessary |
| Repayment while studying, volunteering, or travelling | Not required, but evidence of the same is necessary |
| Repayment while on leave | A letter from the employer detailing the pay while on leave is required |
| Repayment while self-employed | Copies of the most recent financial accounts or a letter from an accountant |
| Repayment for US citizens | Foreign Earned Income Exclusion allows excluding income earned abroad from US taxes |
| Repayment for federal student loans | Income-Driven Repayment (IDR) plans are available |
| Repayment for private student loans | Private lenders may not be able to sue while living abroad, but missed payments can hurt the credit score |
| Repayment for UK residents | Notify the Student Loans Company (SLC) before leaving the UK |
| Repayment for ROI residents | Notify the Student Loans Company (SLC) if residing in the Republic of Ireland for more than three months |
| Repayment for other countries | Notify the Student Loans Company (SLC) before leaving the UK |
| Repayment methods | Direct Debit, automatic payments from a US bank account, or electronic transfers from foreign banks |
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What You'll Learn
Notify the Student Loans Company (SLC) of your plans to live abroad
If you are planning to live abroad, it is important to notify the Student Loans Company (SLC) of your plans. This is because the SLC needs to assess your income and determine your repayment threshold for your new country of residence. The repayment threshold is the amount you need to earn before you start repaying your student loan. This threshold may differ from the UK threshold due to variations in the cost of living.
To notify the SLC of your plans to live abroad, you must complete an 'Overseas Income Assessment Form'. This form will require you to provide details of your income and employment status. You may also need to submit additional evidence, such as payslips, employment contracts, or bank statements, depending on your situation. It is important to be as detailed as possible when completing this form, as it will be used to determine your loan repayment schedule.
The Overseas Income Assessment Form is valid for 12 months. If you remain abroad after this period, you will need to fill out another form and provide updated information about your income and circumstances. Keeping the SLC updated on your income is crucial, as failing to do so may result in penalties and a 'fixed monthly repayment' charge. This charge varies from country to country but can be over £500 per month.
It is also important to keep your contact details up to date with the SLC. This includes providing them with your overseas contact information before you leave the UK. By doing so, the SLC can get in touch with you regarding your loan repayments and any changes to your circumstances that may impact your repayment schedule.
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Submit an Overseas Income Assessment Form
If you are planning to live outside the UK for more than three months, you must update the Student Loans Company (SLC) before you leave. You will be asked to complete an 'Overseas Income Assessment Form', which will require you to provide details of your income and employment status. Here is a step-by-step guide to submitting the Overseas Income Assessment Form:
Step 1: Gather the Required Information
Before filling out the form, make sure you have all the necessary information. This includes personal details, residency information, employment status, and financial support declarations. If you are employed, you may need to provide a recent contract of employment or a letter from your employer detailing your pay. You may also need to provide financial account statements or a letter from your accountant confirming your income. Remember to specify the currency of any income.
Step 2: Complete the Form
The Overseas Income Assessment Form can be filled out online or downloaded and printed. Carefully fill out all the required fields, providing accurate and up-to-date information. If filling out a printed form, ensure your handwriting is legible.
Step 3: Provide Supporting Documentation
Along with the completed form, you may be required to submit evidence of your income and financial status. This could include pay stubs, bank statements, tax returns, or other relevant documents. Remember to include these to avoid any delays or issues with your assessment.
Step 4: Submit the Form
Once you have completed the form and gathered all the necessary documentation, it's time to submit it to the Student Loans Company. You can submit the form and supporting documents via email, fax, or postal mail. Make sure to keep a copy of everything for your records.
Step 5: Await the Outcome
After submitting your Overseas Income Assessment Form, the Student Loans Company will review your information and determine your repayment status. They will then send you a letter or email outlining any changes to your repayment amount or currency. If you have provided all the necessary information, your assessment should be processed without any issues.
Remember, it is important to submit the Overseas Income Assessment Form and keep your information up to date with the Student Loans Company to avoid penalties and ensure you are paying the correct amount based on your income and country of residence.
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Understand the repayment threshold for your country of residence
When it comes to understanding the repayment threshold for your student loan while living abroad, there are several important factors to consider. Firstly, it is crucial to determine whether you are a Plan 1, Plan 2, or Plan 4 customer, as the repayment thresholds and calculations differ for each plan.
For Plan 1 customers, the overseas earnings threshold is determined by converting your gross annual salary into GBP using the exchange rate of your country of residence. The repayment threshold (in GBP) for that country is then subtracted from your annual salary, and you repay 9% of the remaining amount. This is divided into 12 equal monthly payments. It is important to note that Plan 1 typically applies to those who received funding from Student Finance England or Wales before September 1, 2012, or Student Finance Northern Ireland on or after September 1, 1998.
On the other hand, Plan 2 customers follow a similar process, but the specific repayment thresholds and exchange rates will vary depending on the country of residence. Plan 2 generally applies to those who received funding from Student Finance England between September 1, 2012, and July 31, 2023, or Student Finance Wales on or after September 1, 2012.
Additionally, for Plan 4 loans, the repayment amount is equivalent to what you would pay in the UK but is converted into the currency of your country of residence.
Regardless of the plan, it is essential to update the Student Loans Company (SLC) about your income and employment status if you plan to live abroad for more than three months. The SLC will then provide an accurate repayment plan based on your earnings. Failure to do so may result in penalties, and you will be expected to pay the fixed monthly repayment for your country of residence, which can be relatively high.
Overall, understanding the repayment threshold for your country of residence involves considering the specific plan of your loan, the exchange rates, and ensuring you provide the SLC with the necessary information to determine your repayment amount accurately.
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Set up automatic payments from a US bank account
If you're looking to set up automatic payments from a US bank account to pay off your student loan while abroad, there are a few things you should keep in mind. Firstly, ensure that you've informed the Student Loans Company (SLC) about your plans to live overseas for more than three months. This is crucial, as your repayment amounts while abroad are based on the income and cost of living in your new country of residence.
Now, onto setting up automatic payments from a US bank account. This process is known as Auto Pay or auto-pay, and it allows you to make your student loan payments automatically each month, without the hassle of mailing in a check or manually paying online. Here's a step-by-step guide:
- Access Your Online Account: Visit the website of your student loan servicer or the official government website for student loan repayments. Log in to your online account. If you haven't set up an online account yet, you may need to create one first.
- Provide Bank Account Information: During the Auto Pay setup process, you'll need to provide your bank account information. This includes the bank's routing number and your account number. Ensure that the account you choose has sufficient funds to cover your monthly payments.
- Designate Payment Amount: Auto Pay allows you to pay the minimum monthly payment or more. If your loan is on an Income-Driven Repayment (IDR) plan, you can only set up Auto Pay for the minimum monthly payment. If you want to pay off your loan faster, you can increase the amount you pay each month with auto-pay.
- Monitor Your Payments: After setting up Auto Pay, don't forget to monitor your payments, especially during the initial months. Check that the payments are being processed correctly and on time.
- Update Information as Needed: If your bank account information changes, be sure to update your Auto Pay details. You can usually do this by accessing your online account and editing your bank information.
- Cancel or Make Changes: Auto Pay provides flexibility. You can cancel or make changes to your Auto Pay settings by logging into your online account. Remember to make any changes at least a few business days before your next payment to ensure they take effect on time.
By following these steps, you can efficiently set up and manage automatic payments from your US bank account to repay your student loan while abroad. This will help you stay on top of your loan repayments and avoid any late payment fees or penalties.
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Open an international bank account to avoid foreign transaction fees
If you're looking to pay off your student loan while abroad, it's important to understand the fees associated with international transactions. Foreign transaction fees can quickly add up, and you may be charged a higher interest rate on your loan balance. To avoid these extra costs, consider opening an international bank account with a financial institution that offers competitive savings rates and no foreign transaction fees.
HSBC, for instance, offers the Everyday Global Account, which is the first Australian multi-currency travel card and bank account without foreign transaction fees. With this account, you can hold up to 10 different currencies on your card, including Australian dollars, US dollars, British pounds, euros, and Japanese yen. This account is a great option for Australians or those who frequently transact in these currencies.
Another option is to look for banks that offer reimbursements for out-of-network ATM fees. Charles Schwab, for example, offers unlimited worldwide ATM fee reimbursements and does not charge foreign transaction fees. However, to open a checking account with Charles Schwab, you must first open a brokerage account. SoFi is another financial institution that does not charge foreign transaction fees, and they offer cash bonuses for eligible customers.
If you're a Canadian, STACK is a prepaid Mastercard option with no FX fees, ATM fees, or monthly fees. This could be a good choice if you're looking for a card without the commitment of a traditional bank account.
By choosing the right bank account, you can save money on foreign transaction fees and put more of your income towards paying off your student loan while abroad. Remember to keep your contact details and employment information up to date with the Student Loans Company (SLC) to ensure you're paying the correct amount based on your income and country of residence.
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Frequently asked questions
The first step is to inform the Student Loans Company (SLC) that you are moving abroad. You will be asked to complete an ''Overseas Income Assessment Form', which will give details of your income and employment status.
The amount you repay will be the same as it would have been in the UK, but converted into the equivalent amount of money for the country you're living in. For example, if you lived in China, you would pay back 9% of everything you earned over £17,085 or the equivalent in Chinese currency.
You can set up automatic payments from your U.S. bank account. You can also set up autopay through your online account, but make sure you maintain a buffer in your checking account to avoid returned payments due to insufficient funds.
If your income rises or falls while you're overseas, contact the SLC as your repayments need to be reassessed.
If you move overseas and ignore your federal student loans, the U.S. government has ways to collect what's owed, such as garnishing your wages or seizing Social Security benefits and future tax refunds. Missed payments could also negatively impact your credit score.
