5 things to do with your extra $10,000 from Biden’s student loan cancellation plan

By Quentin Fottrell & Leslie Albrecht September 13, 2022

President Joe Biden announced in August that federal student loan borrowers earning less than $125,000 a year would have up to $10,000 of student loan repayments forgiven and up to $20,000 if they received Pell grants in college.

If you’re one of the around 11.8 million people who will have their student loan debt eliminated thanks to Biden’s forgiveness plan, here’s what experts say you should do next.

Invest

Jackie Fontana, a CFP and portfolio manager at FBB Capital Partners, suggested investing in U.S. treasuries, or a well-diversified equity exchange-traded fund.

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[W]ith the stock market beaten down so much this year, it’s a great time to practice the age-old wisdom of ‘buy low.’

– Grant Meyer, a certified financial planner and founder of GTS Financial

Look ahead to retirement

A 25-year-old who starts investing $200 a month (assuming a 6% return) would have $393,700 saved up by the time they turned 65, according to Her Money.

Pay off credit card debt

High interest debt will hold you back from saving for a house and also hurt your credit score.

Take a chance on a new job or career

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If you had to focus on salary alone to ensure you could make payments on student loan debt, but now don’t have that concern, maybe it’s a chance to pursue a dream where there may not be as much focus on salary – or starting out new in a different field where you’ll have to work your way up again.

– Meyer

Speed up the road to homeownership

A survey by Rocket Mortgages found that about 70% of student-loan borrowers who planned to buy their first home within the next decade said Biden’s student-loan forgiveness could help shorten their purchase timeline by 1 to 3 years.

Contribute to an emergency fund

Consider saving enough to cover 3 or more months’ worth of living costs.

Lastly, though it may be tempting, do not use the freed up cash “for extra spending money,” said Catherine Valega, a certified financial planner and chartered alternative investment analyst with Green Bee Advisory. “That blows it — and defeats the purpose.”

Keep reading on MarketWatch.

Photos by:  iStock/Getty Images Story by:  Quentin Fottrell & Leslie Albrecht Google Web Story by:  Amelia Langas

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