What Happens to a Defaulted Student Loan if the Borrower Leaves the Country?

The most aggressive technique a lender can use to attempt to collect on a defaulted student loan is wage garnishment. In this situation, a court determines the borrower has a legal obligation to repay the debt, and the court decides how much of the borrower's income can go toward the debt each month. The sum is automatically deducted in a legal process, and the borrower does not have control over whether or not the debt is repaid. This option can be removed if the borrower moves out of the country.

US Debt Law

The United States legal system will not have the authority to continue to impose US debt law on salary paid by a foreign entity. Since failure to repay debts is not a crime in many countries, including the US, the courts cannot ask for the borrower to be repatriated in order to face court. Ultimately, there is little a domestic lender can do in this situation to recover the sum.

US Credit Score

While the borrower is out of the country, his or her credit score can continue to drop. However, the credit system is not largely applicable abroad. If the borrower returns and the debt is not past the statute of limitations, though, the borrower will likely have to repay the debt and face the credit problems.


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