Student Loans on a Foreign Budget
How expats handle debt from abroad.
Callie Woods was 18 years old, on the brink of choosing a college, when her older sister sat her down for a talk. “Mom and Dad did a crap job of explaining student loans,” Callie remembers her sister saying. “You don’t have to go somewhere expensive. You can go to a state school and you won’t have to take out loans.” Still, 18-year-old Callie didn’t grasp the weight that loan payments would later exert on her. She ended up attending an expensive private university, and she’s now dealing with the debt her sister warned her about. When it comes to navigating her payments, though, Callie has an additional complication: she lives in Singapore. She receives a paycheck in Singaporean dollars; she lives in a time zone 13 hours ahead of her home on the East Coast. If an issue arises with her bank or her lender the time difference makes it takes days to figure out what, in the US, could be resolved in a day.
It’s estimated that 40 million Americans have student loans to repays, and Student debt in the United States reaches a staggering number of $1.2 billion. According to Pew, between 1991 and 2013, student borrowing increased by more than four times. Yet few college students fully appreciate what it means to enter the job market weighed down with debt, or to spend years budgeting around the bill they spent four years running up.
As student debt has skyrocketed, a growing number of Americans have begun emigrating abroad. The exact amount of US citizens living abroad is notoriously difficult to quantify, but a 2016 State Department report put the number at 9 million, in comparison, to a 1999 estimate, through US Consular data, of about 4 million in 1999. While some choose to move abroad based on leisure, others make it as a calculated financial or career decision. A 2016 study by the Federal Reserve Bank of New York found that 45% of recent college graduates in the US are underemployed.
Between low salaries, high costs of living and a tight job market, many graduates can find comparable salaries and a higher quality of life working as, say, an English teacher in South Korea. A US college degree often values much more outside the country, and grads can access employment opportunities that would be much more competitive in the US. Upon returning to the US, too, a stint overseas can be a valuable asset for a resume, connoting an applicant’s intercultural skills and adaptability. Living overseas can have unpredictable consequences on loan repayment, though. For some, a lower cost of living can allow for more savings; for others, lower wages can make repayment nearly impossible.
For Johnna, an English teacher in Mexico City, moving abroad became her only job prospect after several bouts of schooling and false starts in various industries. The 2009 recession and student debt only exacerbated her financial situation. Originally trained as a teacher, Johnna failed the certification exam multiple times because of her dyscalculia — that is, dyslexia that affects skills with numbers. Johnna returned to school in her early 40s in hopes of breaking into the event-planning business. She chose a community college in Philadelphia, and she took out a $10,000 loan to fund her studies. When she graduated in 2009, though, the recession had all but immobilized the event-planning industry. “When I applied for planning jobs, they said, ‘you’re a teacher,’ and when I applied for teaching jobs, they said, ‘you’re a party planner,’” Johnna says.
So Johnna moved back to her hometown of Kansas City, where she hadn’t lived in over twenty years. She entered an express program to become a therapist, but quickly discovered the private school that offered it — a satellite campus of Webster University — offered a mediocre program, aimed at anyone who could get a loan. “I found out it wasn’t even an express program,” she says. “They gave one class every ten weeks for four years.” She dropped out of the program. Saddled with debt and unable to find employment in the US, Johnna decided to move to Mexico, where she could teach English without certification.
In Mexico, Johnna’s salary of about $1,000 per month, though high by Mexican standards, leaves her little to cover her loan payments, now around $600 per month. Because of her low income, she’s currently not required to make any payments. Eventually, she thinks she’ll reach loan forgiveness. If she’d known how she’d end up, though, Johnna says she’d never have taken out her initial loan of $10,000. “It never crossed my mind that I’d be saddled with student debt that I’d be unable to pay back,” she says. In Mexico, though, Johnna is just as well off, if not better. “In the US, I couldn’t get a job, so I wouldn’t be able to pay my loans anyway,” she says.
Amira Rahim, a painter, entrepreneur, and first-generation college student, also found that moving abroad worked to her financial advantage. She graduated from college in 2009 with almost $40,000 of debt. When she moved to the UAE in 2013, she chose to defer her payment for a year. She started a business selling her art online and to expats in Abu Dhabi. After a year, her art sales earned her enough money to live comfortably, and Amira begin paying off her loans.
For Amira, living abroad has made everything possible. She moved back to the US in May 2016, but quickly realized her business model — and her financial situation — was more suited to living abroad. “I realized I liked being an artist and an expat,” she explained. “Moving abroad forces you to tap into communities in different ways.” In Abu Dhabi, she’d sold paintings for an average price of around $800, while in the US, they went for for closer to $300. “In expat communities, people tend to have more disposable income,” she says. Amira is almost finished paying off her loans; she went to Bali and Italy last year. “It’s made things totally easier. It’s the best thing for my business,” she says. “And you’d never think you could do it as an artist.”
Amira’s digital nomadic lifestyle perfectly suits living overseas. The lower cost of living has allowed her to save enough money to live comfortably and continue investing money in her business. The low cost of living can also adversely affect repayment, of course, as it usually means lower wages. Lizzeth Vazquez found this when she moved back to Mexico, where she’s from originally, after attending college and grad school in the US. Her loan repayments sum around $300 a month, and her job as a social worker in Mexico pays about $400.
The first in her family to attend college, Lizzeth had been cautious to avoid debt while in undergrad: she took out only a small loan to cover living costs while studying abroad in Paris. When she attended grad school to receive her social work degree, a scholarship covered half her costs. To cover the rest, though, she racked up around $45,000 in debt. Lizzeth spent time living in both the US and England after graduating, including several years in California, where a program for workers in the social sector paid off $1,000 of her debt each year. Fortunately, though, her husband makes enough money to allow her to pay off her loans — a key factor in their decision to move. “If I were single, I wouldn’t have been able to move back to Mexico,” she says. (Technically, she might now qualify for loan forgiveness, but because her household’s income can cover the payments, she continues to pay them off.)
Debt can be the deciding factor between staying and leaving; between testing the waters in a foreign job market or consigning one’s self to underemployment in the US. Travelers can resort to a variety of strategies, including deferment or income-based repayment plans, but, almost always, the debt must be paid. Tamara Mahoney paid her loans off over about 11 years of living outside the US, primarily in Paris and Amsterdam. She insists the key factor in repayment is getting started, accepting it, and paying regularly. “When people have horror stories, it’s because they didn’t start paying at an early age. When you first start paying when you’re 22 and you’re like, there’s no way I can pay this, it gets easier.” Tamara finished off her last chunk of debt a year early, after selling her house in Amsterdam. She recently moved with her family to San Andres Cholula, Mexico, where she’s glad to be debt-free. “It’s nice to move and not have something in another country hanging over my head,“ she says.
Callie, who moved to Singapore to pursue travel and cross-cultural experiences, notes that debt affects her life marginally, but she wouldn’t change the decisions she’s made. “If I’d let loans keep me in the US rather than moving abroad, that’s when they really become a ball and chain, rather than just an everyday grievance.” Right now, she’s in the process of consolidating her loans, which involves phone calls at odd hours and navigating bureaucracy via email. She has to pay more attention to her spending to afford her payments; she can’t go out as frequently or afford the spontaneous weekend trips that some of her friends in Singapore take. “It goes against this archetype of the young, carefree, 20-something living abroad,” Callie says. “I guess there’s a less attractive underbelly to that archetype.”
