Renouncing citizenship - what happens to loans

Here is the situation: I’m a dual citizen of the USA and a European country, where I moved about 10 years ago. I have been repaying my loans all these years and owe more now than I originally borrowed, mainly because my income here is low and the Recession hit me hard. I’m not looking for sympathy. I’m on an IDR plan, but it could be another 10 to 15 years before it’s paid off I have lost track and feel like I’ll be paying forever.

That said, I have no intention of moving back to the US. I’m settled here, with a family and no ties pulling me back. I plan to renounce my US citizenship soon. Despite potentially favorable terms with the IBR (which is unpredictable given Congress’s whims), the system feels exploitative. I’ve already repaid a substantial amount of the principal. I just want to sever ties and move on.

So, does anyone know what happens if I stop paying after renouncing? I don’t think my credit score here is linked to my US score (both are quite good). Aside from being viewed poorly by those who’ve diligently repaid their loans, what are the actual consequences?

Are there any former US citizens who kept paying their loans after renouncing? What motivated you to do so (beyond just being honest)? How did you manage payments if you’re no longer filing US taxes? I want to do the right thing but am unsure how to proceed.

NB to mods: I’m not advocating for default or illegal actions, just seeking to understand the potential consequences. If it’s really bad, I’ll continue paying. But you don’t know unless you ask.

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Renouncing your U.S. citizenship is a significant decision and nothing much will happen to your loans.
Here are some of the significant effects to expect:

  • Loan Obligations Remain: Renouncing your citizenship does not absolve you of your debt obligations. You are still legally required to repay your loans.
  • Credit Impact: While your U.S. credit score might not directly affect your credit score in your European country, defaulting on your loans can still have repercussions. U.S. lenders can report your default to international credit agencies, potentially impacting your creditworthiness globally.
  • Collection Actions: The U.S. Department of Education and private lenders can still pursue collection actions against you, including wage garnishment (if you have U.S. income), tax refund offsets, and legal action.

Did you have a job in the US? If so, you won’t be able to get your paid-in social security benefits, so I wouldn’t advise giving up your citizenship. Moreover, you can never predict what will occur in the future. Ultimately, I believe there will be widespread forgiveness; but, this will depend on how the next election turns out.

While the situation is complex and frustrating, it’s essential to weigh the potential consequences of defaulting against the long-term financial implications.

I strongly recommend consulting with a tax professional and an attorney specializing in US expatriation to understand the full scope of your options and potential consequences.

When you renounce U.S. citizenship, you must:

  1. Complete the Process: Go to a foreign country, fill out the required forms, and pay the fees.
  2. Settle Taxes: Pay all pending federal taxes before renouncing.
  3. Handle Loans: You are still responsible for repaying all outstanding federal and private loans, even after renouncing citizenship.