How To Manage Student Loans Teaching Abroad
Many people who travel abroad to teach English wonder how to manage student loans they’ve accumulated. It’s a legitimate concern when making the decision to uproot your life and start-up in a new country. But, it managing student loans doesn’t have to be stressful if handled correctly even as a new expat. I’m going to give you a solid plan based on my own experiences as an expat with student debt and show you what to do (and more importantly what not to do) to stay on top of your payments and even pay off your debt completely while teaching abroad.
What should I avoid doing?
We’ll start off with the most obvious here but under no circumstances should you ever not pay your debt. I didn’t take this advice when I first left university. Instead, I headed straight for the backpacker trail. The whole time in the back of my head I knew I had loans to pay for and I knew that every month that went by which I didn’t even submit a payment was a notch against my reputation and reliability, but, student loans and credit scores were the furthest things away as I lounged around on pristine white beaches off the Cambodian coast using what meager savings I’d built up to party on. Fast forward that to four years later and only about six or seven payments towards my loans and things finally hit me. Since then I’ve paid off almost all of my debt by following the advice I will give below.
The point here is that it isn’t a problem that is going to go away and pushing the inevitable forward will only add more to your overall debt on account of the interest that will be accruing while you are not making payments as well as add to later expenses if you try to do something like mortgage a house and end up paying a higher interest rate than you would have had you paid off your debt. Letting your loans go into default will also prevent you from pursuing any advanced degrees after your bachelors should you desire to do so. So don’t stop making payments. If for whatever reason you can’t make payments you do have options that will be discussed below.
Secondly, you don’t want to get discouraged or overly stress about your debt. By its very nature, debt is a stressful thing to have and will constantly eat away at you until its paid off. However, by focusing too much on the debt itself and not paying the debt off you are going to add unnecessary stress that will seep into other parts of your life such as your performance at work or your social life. Notice I specifically said focusing on the debt itself will add stress. This is because there is nothing you can do to change what you owe (except pay it down and pay it off of course). Thinking about it or regretting it or worrying about it won’t change anything. Instead, focusing on the act of paying it off, whether that be making more money or paying more on your principal or trying to negotiate down your interest, will actually help you to achieve your goal of being debt-free faster and can help alleviate the stress of having the debt by putting you into control of it instead of allowing your debt to control you.
What are my options?
This will be largely dependent on the type of loan(s) you have, whether private or government-backed and how these debts were structured. For example, a private loan may be subject to rate changes and, should you be unable to pay it at any time, different rules surrounding default than would a loan that is with the federal government. A government loan will have options such as forbearance, income based payment plans, debt forgiveness, etc. that you will be able to utilize to help you if you need it. A private loan may or may not have some of these benefits depending on which company it is with.
For a teacher that is traveling abroad, figuring out how to keep your payments up to date will be of great importance as the last thing you want when you finally decide to move back to your home country is to have massive debt that has gone into default and have to deal with creditors, garnish wages, and other penalties. If you know you are only going to be out of the country for a short amount of time, such as a few months to a year, you may think about putting your loans into forbearance. This will freeze payments to your loan while you are abroad so that you don’t have to stress about them. However, you need to know that forbearance does not eliminate the accrual of interest which will continue for the duration of the forbearance period at which point it will get tacked on to the principal. Depending on how much your loans are this can be a sizeable chunk of change to add-on to the principle. To get a better understanding of how interest rates work on student loans you can read this article from Student Loan Hero.
If you know that you are going to be abroad for a longer period of time or if you are unsure when you will be returning to your home country then you are going to want to create a plan for repaying your loans using your teaching income. In another article, I discussed saving money as an expat English teacher. I recommend you to read that in order to help get your mind in the right framework for paying down and eventually paying off your debt which you will be unable to do if you have no money left over each month. The plan I’ve outlined below can work in conjunction with the tips I give in the other article to help you more efficiently manage and eliminate your student loans.
Also, if you don’t already have a job and you are currently in the process of looking, think about using the benefits that different schools offer to your advantage. Remember that schools in many countries such as Saudi Arabia, the United Arab Emirates, Korea, and in some cases China will offer you accommodation or at the very least subsidize your living expenses. This can go a long way in reducing your cost of living and will allow you to put significantly more towards your monthly payments and eliminate your student loans faster. Working in a more rural or suburban area can also help you to greatly reduce your cost of living. Take this into consideration if you aren’t yet teaching and keep your options open so that you can find a job that will best suit you and will further your ability to pay your loans back faster.
How do I create a payment plan?
The following is what I refer to as the PAP system which is prioritize, automate, and pay extra. While you are going to need to modify this to fit your specific situation it should provide a solid foundation on which to get started on the process of paying back your loans while you are teaching abroad. Remember that if you are unable to make your monthly payments that there are options such as income-driven repayment plans and forbearance which you can utilize to stay on top of your monthly payments. You will need to contact your lender to set these up. However, if you can avoid these options then you will be doing yourself a great service as you will be able to pay off your loan much faster. The plan I’ve created below should be able to help most people and relies on simplicity. So, like I said you will need to modify the process based on your specific circumstances, make sure to keep it simple and things will be much less stressful for you.
The first step will be to evaluate your loans and prioritize them based on which ones should be repaid first. Not all loans are created equal and some of the loans you have in your debt portfolio are going to be worse in terms of their financial impact over time than others. The most important thing to look at is the interest terms to see how much you are paying in interest and what this totals out to. It is important to remember that with student loans you are going to be paying the interest and any fees first before you even begin to touch the principal. So, it is entirely possible that if your interest rate is high enough and the principal amount large enough you could go for years just paying the interest of before you even begin to touch the principal. You can probably figure out that prioritizing the loans that are generating the highest amount of interest is going to be important for not only paying your loans off faster but also reducing the amount of money you owe over the lifetime of your loans.
The second step in this payment plan process is going to be to automate your payments if at all possible so that you don’t have to think about the money that is going towards your loans. As with most anything in life, the less you have to think about the easier it is going to be. If you get paid each month and you have to manually go in and make a payment then it is going to be very tempting to become discouraged about the money that is coming out of your paycheck. Automating the process so that you don’t even see the money being removed will make it so that you don’t even miss it. It will also reduce your stress as paying your loans will be one less thing you have to worry about each month on top of whatever other bills you have. Setting up automatic payments may be different for different lenders so you will want to talk to the company or different companies that handle your loans to see how you can get automatic payments set up. This may be tricky if you are getting paid to a local bank account in the country you are working in so this will be something you have to figure out. Whether the lender can withdraw the money directly from your foreign bank or if you will have to set up transfers to a bank in your home country (which can also be automated) and then set up the automatic payments towards your loans from that account.
Lastly, you are going to want to pay extra whenever possible to reduce your loans as fast as possible. Do you really need to go out drinking three times a week? Or can you reduce it down to once a week or every two weeks and put that extra money towards paying off the loan. Anything you can do from cutting your cost of living (which I would recommend anywise) to increasing the money you make each month from utilizing a skill as a freelancer or other methods, such as teaching English for a company online, can go a long way to reducing the debt you owe and ultimately becoming debt free. Remember that the faster you pay off your debt the faster you can begin to use that money for things that matter or just for some plain old fun. Enduring a bit of boredom now so that you can get out of debt faster and do what you really want to do with your money is going to be worth it in the long run (something I wish I would have figured out sooner).
What are some final tips?
Managing your student loans while teaching abroad doesn’t have to be a complicated process. Even though it may be a bit more arduous depending on how you are getting paid to actually get the money to the lender, it doesn’t have to be any more stressful than if you were living at home. The important thing here is to have patience and remember that keeping your eye on the end result of being debt free and your mind focused on the short-term goals of paying as much as possible each month will go a long way in helping you to achieve your goals faster. This is going to be the same whether you are one hundred thousand dollars in debt or one thousand. Another important thing to remember is that while paying off your loans as fast as possible is of great importance, you don’t want to reduce your cost of living to such an extent that you become a bored hermit. Make sure you are setting time and money for yourself to do the things you want to do while keeping the goal of debt elimination in mind. In the end, you are going to be thankful that your debt is paid off but you will also be thankful that you were able to preserve your sanity by thinking of yourself a little. Remember to keep your mind focused on paying off the debt and not stressing about the debt itself. Action is the key here and focusing on how much you owe or whether it was worth it or not will only create a state of stress and anxiety that can prevent you from doing what you need to do to pay your loans off faster. While you may need to modify the above process to fit your specific needs it should provide a good framework for you to manage and eliminate your debt while teaching abroad.
I want to help you find an awesome job in the ESL industry and then excel at it. I’m a TESOL certified teacher with over three years of experience working both online and offline. I have worked with students ranging from young learners to advanced level university speakers and have worked in recruiting and hiring, teacher training, and content creation. I’ve seen the good and bad of the ESL industry and I’m here to tell you about it.