Paying Your Student Loans from Abroad
Applicants often ask me about dealing with student loan debt while teaching in China. With a little bit of planning and effort, there is no reason why student loans should get in the way of teaching overseas. Paying your debts while in your home country is undoubtedly much easier and takes fewer steps-most student loan companies will just deduct directly from your account or send you a monthly bill which you can easily pay by check. Paying won’t be so easy from abroad, but it can be managed.
If you are a fresh graduate in the US, remember that you get a six-month grace period on your loan debt (interest free!). If you are currently paying (or need to start), the simplest solution is to ask the loan holder to allow a delay of payment through either a deferment or forbearance. A deferment allows teachers to delay payment interest-free, while forbearance delays payments but interest continues to accrue. During forbearance, you can either pay the new interest or allow it to be added to your total.
Contact your loan holder to see if you qualify for an interest-free deferment, as this is by far the best option. If not, you will almost certainly qualify for forbearance. Before you balk at the idea of allowing interest to accrue, sit down and crunch the numbers. The amount of interest owed at the end of the year is likely much less than you think! And remember, you won’t be paying taxes at home on the money you make overseas, which will probably come close to evening out your added interest payments. In the US, for example, the first $90,000 you make overseas will not be taxed. As teachers, you won’t have to worry about exceeding this limit!
If you cannot or will not delay payment, then you will need to do a bit more number crunching. Before you think of accepting any job offer overseas, find out exactly what your monthly payment will be. Talk to your recruiter (hopefully us!) about what to expect for a salary. This is no time to be shy about money-we can help you figure out if the amount you are going to make overseas, minus your loan payments, will give you the kind of life you want. Applicants often do not understand that it takes much less to live a fairly good life overseas. Comparing exchange rates of job offers overseas with your current budget at home is not a good indication of what your life abroad will be.
Deciding how to manage paying your loans will take a lot of management and planning. The best way to manage paying your loans is to set up an account at home before you leave for your new country.
Plan to have a couple of months of loan payment in your bank account to cover your first few months abroad. Once you start receiving a steady paycheck, you can wire money to that account at home. You will need to find out on what day you get paid, how long the money transfers take to show up in your account, and on what day your loan provider will deduct-you don’t want any late fees!
In some countries, wiring money home is too costly. This is where the creative use of Paypal comes in handy. First, set up an account at home linked to the bank account your loan provider deducts from. Then, once you get to your new country, set up another Paypal account for that country and link that to your new account in your new country. When you get paid, fund your local Paypal account, transfer the money to the Paypal account at home, and then fund your home bank account with that money. This will take some time. You also need to be prepared to be higher exchange rates if you decide to send money home via Paypal. Remember that there is usually a five-day wait before the funds will show up in your account, but many teachers use this method to move money.
If all else fails, you can send money to a family member who can send a check to your loan provider for you. A family member is likely to front you the money in case there are delays and hopefully, you can just send them money every few months instead of every month, which will result in less fees.
One last quick tip: start all payments one month in advance. Moving money around internationally takes time. If your loan payment is due on February first, start the process on January 1st. You don’t want delays that are out of your control resulting in late fees or hurting your credit.
A majority of our teachers are dealing with some kind of debt from home and they manage it, so don’t let fear of managing your debt stop you from fulfilling your desire to live and teach abroad! If they can do it, so can you. And remember, we are here to help if you get stuck!