While most people wouldn't consider skipping out on their student loan payments willingly, sometimes the situation becomes dire enough to warrant it.
If it comes to a choice between paying student loans and paying rent or buying food, most will opt for the latter. And while declaring bankruptcy will rid you of almost all of your other debts, your student loans will stick with you through thick and thin. It's like being married to a blood sucker with no option of divorce.
So, say that your are in a position where you KNOW you will never get on top of your student loans. For example, here is an article from CNN of a music student, Chris, who took out $160k in student loans thinking his payment would be $600 per month:
http://money.cnn.com/2008/10/23/pf/college/student_loan_fugitives/index.htm
Sadly, at $600 a month he would never be able to repay even a 6% interest loan! So, what did he do? He took off overseas.
It is unfortunate that he felt his situation so dire that he needed to leave the country. Fugitive students start their lives over again in a foreign land. Most often the student loan creditors don't go after these fleeing debtors as they are difficult to track down, and it costs the lending agencies a great deal of money to collect.
How about if you just stop paying and stay in the country? Well, your creditors will harass you; they will garnish your wages; they will take your tax refunds; and they will destroy your credit leaving you unable to purchase a home, and sometimes will cost you employment opportunities or apartment rentals. Oh, and those that are in default are unable to secure additional student loans if they need to return to school to retrain.
While I usually don't support ditching your student loans and leaving the country, what kind of life will students have who over borrowed and can't pay? Even those who over extended themselves on mortgages they can't afford and consumer debt have a chance to begin their financial lives again through bankruptcy.
Chris and Carl (the other student discussed in the article) are not alone in their plight. Read the user comments attached to the story. There are many in similar circumstances as well as a few that even exercised this option themselves!
Pros
- You will not have to pay your student loans while you live outside the United States since your whereabouts will be unknown to your lenders
- You will not be harassed about paying your student loan (as long as your creditors can't find you)
- You can start over with a clean slate in a foreign land
- Money you earn outside the United States will not be garnished
Cons
- You will not be able to come home to the United States without the possibility of punishment for dodging your student loans
- You may feel guilty about relinquishing your responsibility to repay your debts
- If you do return to the United States, expect your total student loan debt to have grown exponentially as fees will be tacked on and interest will continue to accrue and compound
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