Greenback Expat Tax Report Finds 2x Surge in U.S. College Students Moving Overseas Despite Costly Tax Trap

New Greenback Tax Services analysis finds the cheapest degrees abroad can carry the costliest U.S. tax surprises

GRANDVILLE, Mich.--(BUSINESS WIRE)--The number of American students earning a college degree overseas has nearly doubled since 2019, with the United Kingdom recording its highest-ever American enrollment, despite complicated tax implications waiting for them back home.

According to data from the Institute of International Education (IIE), more than 95,000 American students pursued four-year degrees abroad in 2025, up from 50,000 in 2019. But new analysis from Greenback Expat Tax Services, a U.S. expat tax preparation firm, found that the cheapest destinations driving that surge often carry the costliest U.S. tax traps, and that the bill frequently lands on the student.

In recent years, students have increasingly traded a semester abroad for the whole degree, lured by tuition that can run a tenth of the U.S. price. While a U.S. degree can cost roughly $80,000 a year, a German public university costs effectively nothing.

Interest surged after the November 2024 election, and the United Kingdom enrolled a record 23,565 U.S. students in 2024/25, according to the U.K.’s Higher Education Statistics Agency. But because the U.S. taxes its citizens no matter where they live, Greenback found, a single overlooked form or the wrong tax election can quietly erase those savings.

“Families are doing the math on a $300,000 U.S. degree and choosing alternative education options abroad,” said Mike Wallace, CEO of Greenback Tax Services. “While they may be making the right financial decision based solely on tuition, what almost none of them see is that the U.S. taxes its citizens no matter where they live, so the cheapest destinations can quietly hand the savings back in tax surprises. The good news is that every one of these traps is avoidable.”

What’s driving the surge

The clearest driver is cost. A four-year U.S. degree can top $300,000, while many European public universities charge little or no tuition and finish in three years. The leading destinations reflect a mix of proximity and price: Mexico draws the most U.S. full-degree students (about 25,000), followed by the United Kingdom (about 21,000) and Canada (about 12,000), with France and Germany rounding out the top five. Interest also spiked sharply after the November 2024 election, when study-abroad platforms recorded a roughly fivefold jump in U.S. searches. Underlying both is a longer-running normalization: earning a full degree abroad has become more visible and logistically easier than it was a decade ago, and enrollment was already climbing before 2024.

But no matter the reason for the surge, surprise taxes can make these savings a lot less significant.

For instance, a 529 college-savings plan is tax-free at a foreign university only if the school takes U.S. federal student aid. Tuition-free German public universities such as LMU Munich and Heidelberg, two schools families choose because they’re cheap, generally don’t appear on the U.S. Department of Education’s Federal School Code List, so a 529 withdrawal can face income tax plus a 10% penalty. Meanwhile, pricier Scottish universities such as St Andrews, Edinburgh, and Glasgow have historically participated.

Foreign bank accounts also bring hidden risk. Any American holding more than $10,000 in foreign accounts, even temporarily from a single scholarship transfer or parental wire, has to file an annual financial disclosure called an FBAR. While the disclosure costs nothing, forgetting to file carries a $16,536 penalty per violation, and the student is legally responsible even if they earned no income.

A degree can get even costlier if the student doesn’t return to the U.S., and what turns a temporary tax question into a lasting one is that more graduates stay abroad. Among non-EU students in the U.K., the number who transition to a work or family visa within two years jumped from 17% to 62% in three years. Despite living abroad after graduation, the student must keep filing U.S. returns for years, and for green card holders, a long absence can put the card itself at risk.

What families should know before they go

• Check the federal aid list before spending a 529. A tuition-free school is often not on it.
• Watch the $10,000 line. A scholarship landing in a foreign account can trigger an FBAR the student must file.
• Don’t default to the Foreign Earned Income Exclusion. The Foreign Tax Credit often preserves thousands in credits.
• Plan before you move, not after. The costliest mistakes come from families who didn’t know the rules existed until a deadline passed.

“A student pursuing a ‘tuition-free’ foreign degree could rack up over $25,000 in unexpected penalties and forfeited tax credits over four years due to unfiled bank account forms, lost education credits, and missed expat tax elections,” Wallace said. “The tuition really is cheaper. But 'free' isn't free until you've planned for the tax bill that comes with it."

To learn more, visit www.greenbacktaxservices.com/.

About Greenback Tax Services

Greenback Expat Tax Services is the leading provider of U.S. tax preparation for Americans living abroad. The company pairs every client with a dedicated CPA or IRS Enrolled Agent who specializes exclusively in expat returns, covering FBAR filing, FATCA compliance, the Foreign Earned Income Exclusion, Foreign Tax Credits, and citizenship renunciation planning. Greenback has served tens of thousands of Americans in more than 190 countries.