Question: I know people ask this question all the time and it’s usually a joke, but I may have a chance to actually do this. I have a friend from college who says that she can get me a job at her dad’s company. The pay would be roughly equivalent to what I’m making now, only my wages wouldn’t be getting garnished for student loans. I’m sick of living paycheck to paycheck.
— Dan in Rhode Island
Howard Dvorkin CPA explains the reality of moving abroad to avoid student loan debt
Hi Dan. You wouldn’t be the first person to leave the country to avoid repaying your student loans. While there’s no official count of just how many people have taken this out, you find stories like this in communities of expats all over the world.
The short answer is yes, you can move to another country – even one as close as Canada – to get away from your student loans. No one from the Department of Education or your lender is going to send the Marines or private bounty hunters to track you down and drag you back across the border.
Can U.S. student loan collectors pursue you in Canada?
Technically, yes, but it’s so costly that most collectors wouldn’t bother going through the process. In order to pursue you in Canada, the collector or lender would first need to get a judgment against you in a U.S. court.
Then they’d need to bring that judgment to a Canadian court to have it acknowledged in Canada. Only then could the Canadian court order something like garnishment of your Canadian wages for a foreign debt [1].
The chances of any collector or lender going to those lengths is unlikely. That’s why this method works (in theory). But before you pack up everything you own and start driving north, there are some things you may want to consider first…
3 things you need to consider before moving to Canada to avoid student loans…
If you have a cosigner, they’ll be left to pick up your tab
The first and biggest concern you need to consider is that any cosigner will be on the hook for your debt if you leave. If a student lender can’t find you, they have every right to go after any cosigners on your loans.
That means your parents or uncle or whoever helped you out by cosigning will be harassed in your place. They’ll start receiving calls seeking payment and can even have their wages garnished if you’re nowhere to be found.
So, unless you plan on taking your cosigner with you when you move to Canada, you might want to reconsider this strategy. If you have cosigners, leaving them with your student debt is a sure way to ruin your relationship.
Your federal loans will be waiting for you if you ever come back
Federal student loans have no statute of limitations. That means there’s no amount of time that can pass that would bar a collector from coming after you. Whether you’re gone two years or twenty, your student loan collectors will be waiting for any signs you’ve returned.
Private student loans do adhere to the statute of limitations for collection in your state. At most a collector on a private student loan has a legal right to sue you in civil court for 15 years. In many states, the statute expires even sooner.
Keep in mind that just because a debt has passed the statute of limitations, it doesn’t necessarily mean that the collector will stop contacting you. The statute simply defines the amount of time a collector can pursue you through the courts, but they can still contact you after that.
If you came back and a private lender started contacting you again, you could simply tell them that you no longer wish to be contacted. As long as you don’t do anything that acknowledges that you owe the debt, which could reset the clock on the statute of limitations, this should stop all contact.
Your U.S. credit score will suffer for years to come
Canada has a different credit scoring system. When you move to Canada, you will start from scratch when it comes to your credit score. You’ll need Canadian credit cards and loans to start building your Canadian credit score.
If your U.S. credit score is awful, then starting from square one may seem like a great idea. You’ll get a fresh start without any student loans holding you back.
That’s all well and good if you plan on staying in Canada forever. If you ever want to come back, however, then your bad credit score may be waiting for you when you return.
Missed payments, defaults and third-party collection accounts will all remain on your credit report for seven years. If you work in Canada for five years and come back, you’ll almost certainly return to an awful credit score.
This could make it difficult to get a car or even rent an apartment once you’re back stateside. You may struggle to reestablish yourself and feel like you’re even further back than when you started.
Weigh your decision carefully and consider other options for relief here
Really, Dan, unless you’re confident that you’ll be happy in Canada and live there permanently, this probably isn’t a practical solution. If you have cosigners, it certainly wouldn’t be fair to them. But even without cosigners, this is an extreme measure that could come back to bite you later in life.
What’s more, there may be solutions that could help you get out from under the wage garnishment and crushing debt that you’re facing now. For instance, it’s common a myth that student loans can’t be discharged through bankruptcy.
If you have private student loans at a school that is not Title IV-recognized, then these loans may be discharged fairly easily. However, even if you have federal student loans and attended a Title IV school, you can still qualify for discharge if your loans are creating severe financial hardship for you.
You may also have other options, such as income-driven repayment plans for federal loans or private student loan settlement. I encourage you to talk to a student debt relief specialist to review your options before you take drastic measures like moving to Canada.
