Some people are put in so desperate a spot they have attempted to bail on their loans by fleeing the country and hiding out from the banks and collection agencies that will inevitably start looking for them.
It sounds slightly unbelievable, not to mention probably a bad idea from a long-term personal finance point of view, but these debt dodgers are real. I've met these Americans in Berlin, my adopted city. I haven't been able to find any statistics on how many of them there are, but I'm not the only one who's noticed the people fleeing US because of their student loans.
"It's a
phenomenon that I'm quite familiar with actually," says student loan lawyer and
author
Adam S. Minsky.
"In my experience, people leave because there's a sense of hopelessness and
they see greater opportunities overseas, usually through a combination of
higher pay and lower living expenses. They think they'll be better positioned
to either pay their loans in real time, from abroad, or to save up and be in a
better place to address the loans a couple of years from now."
Many of
the students I talked to fear the possible consequences of this strategy, but
so far none of them have faced any repercussions. And according to some
experts, they may never.
Joshua R.
I. Cohen, who calls himself
The Student Loan Lawyer, tells me that this plan could
work for some people, albeit only if the debt dodgers plan to never live in the
US again. Students who move to a foreign country and stop paying off their loan
debt "will only feel consequences if they're working for a US company on
foreign soil," Cohen says.
If you're living abroad, earning a living from a foreign company, not paying US
taxes, and not collecting social security, then loan companies can't touch you,
nor will the government chase you after you move abroad.
"The
federal government doesn't have really strong tools for collecting debt from
people who move overseas," says
Mark Kantrowitz,
another expert on student loans who serves on the board of the
Journal of Student Financial Aid. "In theory, you could
live the rest of your life in another country."
Of
course, if your family co-signed your loan with you and remain in
America, they'll still be on the hook. And this strategy relies on you
not wanting to go home again. If these former
students ever decide to come back to the US, "the debt will still be
there—it
never goes away," says Cohen. "All they're doing is putting off what
could happen if they come back to the
US."
To get more insight about debt dodging, I spoke
to several Americans who moved to Berlin and stopped paying their loans. All
names have been changed.
Brian, 29
$40,000 in debt
I took out loans when I went to school in California. I
received enough scholarship money at the time to cover half of the tuition and
the loans covered the remainder. I did not have a plan for paying them off, nor
did I consider how I would make it work once I graduated. I needed to go to
school and it was the only solution at the time.
When I decided to move abroad, I think in the back of my head
I thought that it would save me from having to pay them off. I saw the interest
rise and my deferral period lapse and the anxiety just kept rising. I'm sure
that Germany and America have some sort of reciprocity when it comes to this
kind of stuff, just like they do with taxes, but I try not to think about it.
The loans are about to default, and I'm worried about the
consequences. I've blocked the loan company's emails from my inbox.
I'm sure they will go after my parents soon, but that won't do much
because they don't have any money either.
I think at this point I owe about $40,000. I really,
truly, honestly don't want to pay it back. Sure, I realize the responsibility I
took on when I signed the papers and agreed to take out the loans, but I should
have never had to do it in the first place. I feel some sort of civic duty not
to pay them back, as if my small protest will make any kind of difference.
I think I know two friends that have completely paid off
their loans and have received an awesome amount of confidence because of it. I
am very proud of them, but I don't think I'm one of those people. I would
rather spend my money on things that I need like food and shelter than to give
it back for a service that should have been provided for me.
Vanessa, 29
$45,000 in debt
I got my associate's degree and then transferred to a private
university in New York. They didn't accept all of my credits, so I had to do
about three years of study. I think it was $53,000 a year at the time. My mom
and I applied for a loan through a private bank called Sallie Mae, among
others. Every American knows that bank, the name Sallie Mae sounds so friendly;
she's just your cute aunt making soup.
Within 48
hours I had $30,000 in my bank account. It was shocking because I had never had
that much money in my bank account before. I remember that after paying my student
stuff it was just gone, as if I never even had it. And I didn't live on it. I
had a part-time job my entire education.
I moved
to Berlin the day of my graduation. I got my loans deferred for one year
and
then my parents deferred it for a bit because you have a short grace
period,
usually six months to a year. When we tried to consolidate them we met a
lot of resistance because they were from so many different banks. But
I've never paid back the federal loans. My parents didn't co-sign on
them. The only
reason that I've ever worried about the debt from the private lenders is
because it affects my parents. I don't give a shit about the loans in my
name.
A year ago, I was working at a fancy restaurant
in Berlin and made a lot of money in tips. For about ten months, I was
paying some of the loans, but I don't have that job anymore so I had to
stop.
Debt
collectors haven't badgered me in Berlin. They haven't found me in Germany. But
when I go home, my phone rings non-stop. I always think it's an old friend
trying to hang out with me, but it's really Sallie Mae. It rings like every
hour.
I have
this shame on the part of my parents because I really did not want this
for
them. When I thought about going to college, this is not what I had in
mind. I
really thought that they were going to be so proud of me. I was the
first child
in my family between my parents to graduate college. But then I realized
that
we weren't thinking about the debt when we were signing up for school.
And sometimes I think living in New York City and going to a
private university maybe wasn't the best idea. I could have gone
somewhere else
and gotten a political science or history degree and only been in
$50,000 dollars
worth of debt. But I'm happy that I got that education. It's the
education I wanted.
If I don't have the money, then I don't
have the money to pay for loans. I need to eat and live and not be a slave to
this debt. But I'm scared. When I look back, I wonder what I could have done differently.
Mario, 34
$160,000-plus in debt
I wasn't
even meant to go to college. It was never my intention. And then all this shit
happened where I took a year off, and I realized,
Fuck, I don't think I can
work overnights at a Target stocking shelves for the rest of my life.
So I
ended up finding this film school in California.
I
couldn't afford this private school, so I told my parents I really wanted to do this
and they co-signed the loans for me. I wanna say it was like $30,000 each year. It's a ridiculous amount of money.
I was,
for sure, intending to pay the loans back. Our mentors and teachers told us
that we would pay this education off for a long time, but everyone in America
is doing it so it's almost like eating breakfast. That's how Americans are
raised.
This idea
that you can't afford college so you just make loan payments when you get out
of school is crazy. I started to question how could you start something when
you're starting in a hole?
Debt is
not the main reason I moved to Europe. I moved for my career, but in the back of
my mind it was a way to start a clean slate. At the same time, I could never really escape
because my parents were co-signers. My parents own a home and were planning on
leaving it to us as inheritance. They were nervous about having their house taken
away from them because of me not paying student loans, and subsequently signed the house
over to my sister so they wouldn't own anything the bank could come after.
To be honest, I just don't see
myself living in America again—for reasons outside of student debt. My
parents
are moving back to El Salvador, where they're from, and then I'll have
no ties to America. I don't really like America or the direction it's
heading. For now, I don't need to care about going back there.
I
encourage whoever I can to study abroad. It's so much cheaper. Starting your
life with even $30,000 or $50,000 in the hole is not a good hole to
start in.
Zoe, 31
$35,000 in debt
I got a
full ride to college and I didn't have to take out loans until the end of my
freshman year. I got a D in a class and I lost half of my scholarship. So I
could have had
no loans. My biggest mistake in life was messing up that
one year in college.
When I
left, I had maybe $24,000 in loans. My intention was to get forbearance
for like a year and then start paying the loans. And I knew I would be paying
the loans until at least my late 30s. My brother, who is six years older
than me, was still paying his loans at the time, and even my dad was paying his
loans then—he got his master's degree when we were kids.
After
school, I went through my grace period and forbearance application and started
paying the loans off. I was working and had a really good job. I think I was
paying like $100 or $150 a month. I decided my senior year that I would move
abroad after graduation. The last six months in the States I wanted to get all
of my loans in order because I knew I wasn't going to be paying them when I
moved to Europe.
I got all
of them up to date, and right before I left I told the loan companies I was
moving and gave them an email address. Once I moved abroad, though, I just
stopped paying. Once you
move abroad, you just kind of turn off that whole part of your life off. They
can't touch you; you're elusive. But they started calling my parents, my
grandparents, my past employers. And I was just living my life in Europe, kind
of oblivious to it.
It wasn't
until about six months ago that I started paying my loans again. I realized
that I'm 30 and I just can't dip out on my loans forever. And maybe I'll want to
move back to America at some point. I don't want to have this burden if I do.
The past
two years I've been banking on this rumored Obama loan forgiveness bill that
still hasn't really been passed. I guess I'll continue at this rate until they
go away? I don't mean until I pay them off. I mean until the government's like,
"You don't have to pay those loans anymore, you millennial! We know you're not
good for it."
For more of Alexander's work, visit his website.
