I have $150k in federal debt from law school and now live overseas. I asked a question about this topic earlier and got a great (and reassuring) response, so here are some more. Although these touch on my specific situation, I think a lot of people who plan on IBR to save them have similar questions.

1) How will I calculate my AGI if all my income is earned overseas? Under the Foreign Income Tax Exclusion, overseas income under $91k is excluded from AGI. Nothing in the statute or Department regulations indicates that lenders will use a modified AGI and include overseas income. Is it really true that I can effectively avoid student loan payments by signing up for IBR, moving overseas, and keeping my income under $91k?

2) Somehow I don’t quite believe that lenders would allow me to get away with this. They might require me to “alternatively” document my income. If they do this, could I rely on the statute or Department regulations to insist that they can only use AGI to calculate payments?

3) If I really do get away with this, I can imagine the Department will restrict the loophole in the future—certainly Congress did not intend to motivate everyone with student debt to leave the country. The most sensible option would be to base IBR payments on a modified, pre-exclusion AGI for overseas debtors. But overseas income is hard to verify. Might the Department cut overseas debtors out of IBR (or ICR, assuming AGI is similarly used with it) altogether? I really hope not, as I don’t have enough money to meet the standard payment; I would have to default.

4) While living overseas, I am teaching in an international school. The school is organized as a nonprofit under its country’s laws and provides many of the services that qualify employment for 10-year forgiveness under PSLF guidelines. Still, I doubt the Department will qualify this as PSLF employment. If I file the Department’s form asking whether my employment qualifies, and if I am denied, is there an administrative process under which I can challenge the Department’s opinion?

5) Assuming that I qualify for IBR but not PSLF for 20 years, I will be hit with a huge tax bill. My only refuge will be claiming insolvency. I need some legal guidance on what I can lawfully do (e.g., transfer funds) to maximize the extent of my insolvency at that time. Unless the law is changed to lift the tax burden, advising IBR refugees might be a booming new area of practice for estate lawyers. Do you know anyone who I can pose estate planning questions to within the context of federal loan forgiveness?

There are so many complicated tax questions, and I don’t pretend to be a tax expert.  The foreign income thing makes it that much more complicated.  Indeed, loan servicers may require Alternative Documentation of Income when they believe that the previous year’s tax form does not accurately reflect current income.  BUT the Alternative Documentation of Income Form requires you to list all your TAXABLE income and specifically says you should NOT include non-taxable income.  I don’t know whether the Foreign Income Tax Exclusion deems the income nontaxable or how it operates.  Something to be research.  I think you need a tax expert and please feel free to put them in touch with me for student loan law coordination.

Thanks for your response. I can’t really afford professional help on the tax questions right now, but hopefully I will be able to afford it in 20 years!

There was a part of my question I thought you would have expertise to answer:

“4) While living overseas, I am teaching in an international school. The school is organized as a nonprofit under its country’s laws and provides many of the services that qualify employment for 10-year forgiveness under PSLF guidelines. Still, I doubt the Department will qualify this as PSLF employment. If I file the Department’s form asking whether my employment qualifies, and if I am denied, is there an administrative process under which I can challenge the Department’s opinion?”

Other people have asked you this question about various overseas entities (e.g., the UN, NGOs). In general, you have answered that 501(c)(3) nonprofits and government entities fall within the statute, while others may or may not. I would add that from a policy perspective, I doubt Congress intended to subsidize debtors who use their education to perform public service for non-Americans.

Still, I want to see if my employment qualifies for PSLF. With the release of a form through which I can ask the Department for an opinion on this, do you think the Department will clarify why or why not my employment falls within PSLF, or give me an administrative process through which I can challenge its opinion?

I’m under am IBR plan. I’ve been told by a loan officer if I submit my taxes showing 0 income in the US, I may be able to just pay 0 a month.
My tax expert, ironically is not a student loan expert and can’t answer student loan questions, so tell me if you find a tax expert that does, please.

However, interesting about the non-profit international school thing. I’m applying for one in about 6 months, so I hope this could qualify for loan forgiveness.

Cheers.