Best Refinancing Strategies for a U.S. Citizen Living Abroad

Living outside of the U.S. can be a culturally rewarding experience. But it can also cause issues when managing your current student loans from overseas — refinancing student loans abroad isn't always a straightforward process.

Many borrowers turn to loan refinancing for lower interest rates and reduced monthly payments. But expatriates living and working abroad might face additional barriers when it comes to refinancing.

Here’s what you need to know about refinancing student loans abroad.

General refinancing requirements

Each private student loan lender has its own eligibility criteria for refinancing. Common requirements include financial indicators, like having a good credit score, stable income and a relatively low debt-to-income ratio.

Most private lenders also require that borrowers have a college degree. But there are some lenders that will work with you to refinance even if you didn’t graduate.

Additionally, refinancing lenders typically require you to be a U.S. citizen (or possess a permanent resident card) and have a valid U.S. address at the time of application. This last requirement can throw a wrench in your student loan refinancing plans if you live and work outside of the country.

But that doesn’t mean U.S. citizens living abroad are completely out of luck.

Refinancing student loans abroad: Opportunities vary by lender

Refinancing lenders require you to provide a U.S. address on your application to access necessary financial information, like your credit profile. Some lenders will draw a hard line in the sand on this requirement. For example, some require the primary borrower to live and work in the U.S.

For other lenders, there might be a gray area if you still have access to a permanent U.S. residence (e.g. your own place or your parent’s address) and can meet the remaining application requirements.

Nikki Bruno, Senior Partner Manager with Laurel Road, provided additional insight on refinancing student loans abroad. Nikki explained:

“Laurel Road allows borrowers to take advantage of our student loan refinancing product while living abroad, being paid in foreign currencies, etc. The borrower’s application will be reviewed based on our standard requirements, which means the borrower would be required to have a U.S. address at application. This could be their parent’s home address or theirs if they have one.”

You might also find a lender more willing to work with you if you’re living abroad temporarily.

For example, Earnest’s website states, “If you are traveling on a short-term basis, we may be able to help if your permanent residence is in a state that we serve. You will also need to be working and paying taxes in a state that we lend in.”

Each refinancing lender’s policy regarding living and working abroad varies. Always ask and be upfront about your living situation and work arrangement before applying.

Alternatives for managing a student loan and going overseas

If you hit a wall with refinancing because you live and work abroad, there’s still hope. Here are two strategies to help make your student loan payments more manageable.

Find a cosigner with a U.S. address

If you don’t qualify for refinancing on your own (e.g. don't meet minimum credit score or residency requirements), you may benefit from adding a cosigner to your application — one with a strong credit history and who lives stateside.

A cosigner with a U.S. address might help your eligibility when refinancing student loans abroad. They could help you score a better interest rate on your private loans, too.

Borrowers with cosigners are viewed as less of a risk because there’s someone else on the hook if you default on your student loans. If you decide to go this route, make sure all involved parties understand the pros and cons of refinancing with a cosigner.

Change your repayment plan

If you’re living abroad with federal student loan debt, you might qualify for an income-driven repayment (IDR) plan that could lower your monthly payment.

With an IDR plan, your monthly payment is based on 10% to 20% of your discretionary income. As part of the repayment terms, your loan balance will be forgiven after 20 or 25 years of qualifying payments.

If you’re aiming to maximize IDR forgiveness while abroad, you could take advantage of a student loan hack called the Foreign Earned Income Tax Exclusion. This legal tax maneuver lets you exclude over $100,000 of your foreign earnings from your U.S. tax return.

Since your IDR payment is generally determined by the adjusted gross income (AGI) listed on your tax return, your student loan payment could be considerably less.

In fact, you could qualify for a payment as low as $0 per month depending on your financial situation.

Read about Student Loan Planner® clients who’ve legally used this loophole while living abroad.

Get expert help

Navigating your student loans is tough under normal circumstances. Living in another country can add an extra layer of confusion and red tape when it comes to paying student loans abroad.

Our team of student loan experts can help you understand various repayment options and strategies unique to your situation. Additionally, we can help you maximize any loopholes while living your best ex-pat lifestyle.

Schedule a consult today for a customized repayment plan.