A Loophole Could Completely Erase Your Student Loan Debt, But You Have To Live Out Of The Country For At Least 20 Years

How bad are y’all really trying not to pay off them student loans? Would you move out the country to be debt free?

There’s a loophole that allows people to make little to no payments on their student loan debt while living outside of the U.S.,according to @vice.

And through this loophole, if you’re making less than about $100,000 a year and you’re on an income-based repayment plan, you can essentially make official payments of $0. That means technically you wouldn’t have to pay a dime back and after years of “paying” creditors $0 a month, they can erase your debt completely.

So what’s the catch? By years, we’re talking at least 20 for the debt to be completely erased. But we warn you, it’s not as simple as just moving away because creditors will find you, even in another country, and running away won’t erase anyone’s debt.

“If the goal is to go abroad so that you don’t have to pay your loans, then that’s just stupid,” said Joshua Cohen, an attorney who focuses on student loans.

Instead, what Cohen suggests is taking advantage of something known as the Foreign Earned Income Exclusion, which is a tax credit worth about $100,000. If you’re living and working abroad, then you technically don’t have an adjusted gross income in the U.S. and by that logic, if you’re on an income-based repayment plan for your student debt, that makes your monthly loan bill zero dollars.

Borrowers who are on these plans are eligible to have their balances forgiven after either 20 or 25 years, depending on the repayment plan. So in theory, if you lived abroad for that long, you could return home after that time and have your debt erased, without having paid any of it!

The catch to that is that the IRS then counts the wiped balance as taxable income—meaning the forgiveness comes with a bill from the federal government—but Cohen and other experts claim that you could technically claim insolvency when that time comes if you have assets that were worth less than the “tax bomb,” as it’s known.

Roommates, are y’all saying “bon voyage” to the U.S. to be debt free? Let us know!

TSR STAFF: Christina C! @cdelafresh