I have a friend who has racked up a mountain of student loan debt. What’s worse, is that my friend got shafted by dishonest school administrators. (it’s a long story, but yes it does happen, and yes they can get away with it)
Anyhow, he’s pretty pissed, and he does not feel that he should pay this debt. The courts have basically told him to fuck off (it’s a state school, so the courts give them “sovereign immunity” from basically any challenge to their wrongful actions, no matter how blatant). With no other recourse, he thinks the debt should fall on the taxpayers of the USA, as they are the people who voted in the laws and the judges that fucked my friend over.
In any case, my friend has wondered what would happen if he were to stop all payment attempts after receiving a permanent visa to Australia or China or somewhere that is not in the USA. Do Sallie Mae or the government collection agencies have the power to garnish his wages in a foreign country?
I tried to research this subject on behalf of my friend, but I was unable to find any actual concrete answers on what the lending agencies (department of education and whoever they hire as a collection agency) can actually do in practice.
While it appears to not be a crime in general in the US to not pay your bills, I wonder if clever prosecutors could find an offense to charge him with to have him extradited back to the US. If he has been ordered by a court to pay, intentionally disregarding the court order to such an extent as to actively remove your money and yourself from the country with intent to evade the order might fall under Contempt of Court or maybe even one of those catchall “engage in a financial transaction affecting interstate or foreign commerce with intent to defraud” Federal statutes.
May I offer some personal advice? It seems to me that doing this would make it impossible for your friend to ever set foot in the USA again. Does he want to cut all ties with his family, etc?
Not paying bills may lead to him declaring bankruptcy, but won’t get you put in jail-- in America.
But fleeing to a foreign country could make things worse.
I’m guessing that if his case goes farther (disregarding court orders?, fraud?) that would put his name on the list of criminals to be stopped by the border/customs guards at every airport. You may not go to jail, but you may get a police escort into a locked holding room at the airport where some of the people sitting next to you are in handcuffs, waiting (like you) for the next flight back to where they came from.
American citizens are required to file a 1040 tax form even if they live overseas, and they must report each bank account they own both in America and in a foreign country. So even if he has a visa or citizenship in another country, he could still find himself facing charges of financial fraud or something. And the IRS does claim power to seize assets and lock bank accounts in foreign countries (as long as the country has a tax treaty with the US, which most western nations do. I don’t know about China. )
The tax treaty between AUS and the USA is like part of the USA tax code: complex, poorly understood, and poorly documented. We were unable to find any actual concreate answers from the USA side.
It is possible to register and enfoce foreign debts in AUS. What the lending agencies do in practice is unknown. In AUS, colleges enforce debts by refusing to release academic results until debts are paid. Since foreign students can’t stay without academic results, this works even against foreign students. Dunno what they do about any small residual.
You won’t get residence in AUS unless you have a truck losd of money, or a good degree or a good trade: I don’t think that saying they want to migrate to avoid debts will help your friend.
And – although I know you were just throwing out examples – I’m not sure a permanent visa is feasible for China.
<IIRC>
If you have a good job, or are married to someone Chinese, you can get a resident’s permit that is trivially renewed every 3 years.
But to formally have permanent residence, you generally have to be mega-rich or a celeb or whatever.
And don’t even think about coming to the UK. Your lot can extradite UK citizens - they would have no trouble with a US one (so long as he wasn’t likely to be executed).
IANAL. My impression is that not paying a debt is not criminal. Foreign judgments certainly may be enforceable in foreign courts. I say may because a British libel judgment will not be enforceable in a US court unless whatever you did would also be libel in the US. That’s because British libel laws are so draconian as to violate free speech. In practice, a Brit wanting to collect from a US resident would have to have his case tried all over again. I would conjecture that if the person were to reside in Oz, he might (again IANAL and this is just a WAG) be able to defend it by claiming the debt is fraudulent and now the state university would not be able to claim sovereign immunity and would be forced to defend their actions.
All this is just speculative, needless to say. Only an Australian lawyer could give you real information on the subject.
I know that in Korea (and probably Japan and China), getting a work visa is conditional on your academic credentials checking out, which they won’t if you stop paying your student loan.
> What’s worse, is that my friend got shafted by dishonest school administrators.
> (it’s a long story, but yes it does happen, and yes they can get away with it)
It would be interesting to hear of a successful legal defense along the lines of “Sure I broke the law, but I did so in my work for a state school and that make me immune from prosecution”.
What your friend ought to consider instead, is to simply pay them some tiny amount, like $15, per month. That way they can never really take any action against him, as he is making regular payments, and attempting to pay. A court won’t issue anything against someone making regular payments. Unless he’s about to start earning a boatload of money, or acquire some expensive real estate, they really will be stifled trying to collect. He need only claim a sick Auntie or some such, as why he can’t pay more, when they call him up, be sincere, promise things will change soon…yada, yada, yada.
10 years from now he may not have quite the same level of bitterness and anger, and they may approach him to settle on some greatly reduced amount. He should, by then, be in a position to pay off and be done. I know someone who did something very similar to this.
I know a fair number of people who can try this, and while it can work in the short run, eventually it tends to make your life extremely difficult and is in general just a really bad idea. If you have any need to manage paperwork at all (say, for a work visa renewal), eventually your paperwork will get flagged, and you will likely need to make a quick exit from wherever you are. Life on the run is no fun.
Does your friend have federal loans? There are literally 7 different repayment plans available. Some of them are very generous, limiting payments to 15% of income and forgiving after 25 years. Private loans are a different story, but there is no reason for federal loans to be as onerous as he is claiming they are.
That’s what I said. He knows about IBR, he just doesn’t feel he should owe 15% of his income for 25 years for something that got taken away from him by dishonest people.
To summarize his situation : the school was a medical school, and he was training to be a physician. He was falsely accused of a crime in an unrelated matter to the school. He sent the schools disclosure policies to an attorney, who analyzed them and found out that he did not have to disclose as he had not yet been indicted for the crime. He was able to prove he was innocent, and the matter was dismissed.
The school found out about this, and basically kicked him out over made up reasons in a kangaroo “administrative hearing”. He researched past cases, and found the school had done this routinely. Medical schools are jerks, and once someone is thrown out by one, none of the others will be interested, and my friend had been forced to borrow over 100k at this point.
Well, your friend is free to feel that way, but realistically the level of disruption he’s inviting into his life by not paying his loans will FAR outweigh the pain of just paying them. He’s looking at inviting a lot of instability and uncertainty, cutting off a lot of options, and really narrowing what is possible in his future- all for a relatively manageable bit of his income (if he’s not making much, it’s going to be less than 15%, with ample options for deferral during hardship.)
What I’ve seen happen in these situations is things go swimmingly for a bit, then eventually you need to go to the embassy for some reason and your paperwork is flagged, and then you end up having to leave the country and the life you have built, racking up huge debts in the process, and return to the US with all of the nasty things that happen when you don’t pay your loan (no ability to get a mortgage, no ability to go back to school, can’t ever get a government job, wage garnishment, etc.) in full force. If you ever want to have a family, retire, or otherwise live a normal life, everything you do is going to be a huge pain in the butt and you have to live with this thing that could turn around and bite you in the ass at any moment.