You’ve likely heard about the student loan forgiveness announcement from President Biden.
- This could be the perfect opportunity to start investing, pay down other debts, or to build momentum in investments you’ve already been making.
- The first way that you should invest this money is to create a cash reserve so that you have the cash available, just in case.
- On one hand, you may simply want to focus on paying off all of your loans to be debt-free. On the other hand, investing may look more attractive if you feel you could earn a decent return on your money.
This news has been spreading, and many folks are wondering if they qualify or not. Those who qualify are excited about the potential of an extra $10,000 available to them now that they don’t have to worry about paying off as debt.
It’s well known that the financial burden of student loans prevents many folks from purchasing real estate and building wealth. This is why taking advantage of this student loan forgiveness program is so essential.
Let’s buckle down and look at how you can invest $10,000 after confirming student loan forgiveness in order to build your wealth and focus on establishing your financial health.
How do you Find Out if you Qualify for Student Loan Forgiveness?
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Nearly 8 million Americans immediately qualify for student loan forgiveness without any application. If your annual income is below $125,000 (or $250,000 as a married couple), you will qualify for $10,000 in student loan forgiveness.
The Federal Student Aid website has stated that relief can be expected within 4-6 weeks of applying. The website recommends completing your application before November 15, 2022 if you want to see the relief before 2023.
If you do qualify, you’ll have freed up $10,000 that you can now invest. This money should be used to build financial momentum for millions of Americans.
How should you invest $10,000?
Here are the best way to invest the money you no longer need to allocate towards your student debt.
Build a cash reserve
The first way that you should invest this money is to create a cash reserve so that you have cash available to you if anything bad happens. Some experts recommend that you save three months’ worth of expenses as a cash reserve to help you handle a possible job loss or another kind of disaster.
Your parents or grandparents have likely advised you of the significance of saving money for a rainy day. Think: your car breaks down, a broken bone, or any of life’s unexpected consequences.
If you already have a cash reserve fund, we suggest topping it off to ensure that you have enough money to be ready for whatever life throws at you.
Start saving for retirement
The sooner that you start saving up for retirement, the more comfortable your life will be in your golden years. Saving for retirement isn’t something that you do later on in life. While getting old is the last thing on your mind when you’re young, you must plan for your older self so you don’t get stuck working longer than you want to because you didn’t prepare.
How can you start saving for retirement?
- See what options your employer offers. Determine if your employer matches your contributions to the company-sponsored 401(k) plan.
- Set money aside from every paycheck. Individual retirement accounts (IRAs) and 401(k)s allow for either tax-deferred or tax-free growth. They’re available in traditional or Roth options.
It’s important to start planning for retirement as soon as possible so that you don’t have to spend your golden years working when you could be relaxing with your family.
Invest in index funds and stocks you believe in
Have you been thinking about trying your hand at investing in the stock market? Since you’ll have more money to invest, you’ll want to put some of your money where it will grow.
It’s usually best to start investing in index funds that contain companies you believe in. You may want to take your chances investing in individual stocks, but it’s wise to wait until you have more experience and confidence as an investor. Sometimes, the best investments are the boring ones that provide consistent results. Targeting 6% to 8% over the long-term will provide big growth over time.
Invest in yourself/your development
This $10,000 could be put towards your personal development or career growth. You may have heard that the best investment comes from investing in yourself. Increasing your skills and knowledge will result in more income, which will help you build more wealth over time.
How can you invest this money into yourself?
Take that course that you’ve been thinking about. Is there a course that could improve your standing at work or help you make more money on the side?
Learn a new skill. Could you use this money towards picking up a new skill, such as graphic design, coding, sales or copywriting?
Try a community college program. Since your debt has been forgiven, you can use this money to upgrade your education at a community college near you.
This $10,000 in relief could be the financial aid that you need to make a career change or advancement that’s been on your mind.
Pay off your other debt
While this isn’t technically an investment, you can use this money to tackle other debts. Chances are that $10,000 isn’t enough to wipe out all of your student loans. While $10,000 is nothing to scoff at, you may not be completely debt free after your student loan forgiveness. You might also have additional federal and private student loans, depending on how much financial aid you took out for your studies. You may also have other debts ranging from credit card debt to a car loan. Use the money you allotted to your student loan payments to reduce your overall debt load.
What You Shouldn’t Invest The $10,000 Into
Since we looked at the best ways to invest this student loan forgiveness money, it’s only fair that we look at what you shouldn't invest in so you don’t squander this unique opportunity. It may be tempting to chase the promise of high returns that are “guaranteed” by some random person on social media. Remember—if it sounds too good to be true, it usually is.
Here are a few ways you should not invest this $10,000:
- Buying meme stocks based on hype and speculation. While Reddit and social media are filled with meme stock success stories, many folks lost money on these investments because they chased the hype without doing the research.
- Random cryptocurrency tokens that you hear about. Many innocent people have lost money in cryptocurrency because they chased ridiculous returns that tokens promised them.
- Penny stocks & other risky investments. High risks come with high rewards, but they also come with the potential to lose all of your money.
The purpose of this student loan relief is to help ease the pressure on your finances. Don’t make things worse by taking on unnecessary risks.
The Final Word on the $10,000
If you find out that you’re approved for student loan forgiveness, then you’ll have $10,000 of your balance wiped out, which should noticeably lighten up the financial burden of student debt. This could be the perfect opportunity to start investing, pay down other debts, or to build momentum in investments you’ve already been making.
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Under the federal program, eligible borrowers can have their loans discharged after 10 years if they meet eligibility requirements.Will my student loans be forgiven after 20 years? ›
Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years or 25 years, depending on when you received your first loans. You may have to pay income tax on any amount that is forgiven.Can my student loans be forgiven if I am retired? ›
“People close to or in retirement who are unhindered with student loans don't have the burden of maintaining those monthly payments, freeing up more money for retirement accounts and investments,” Reynolds says. The federal government now offers up to $20,000 in student loan forgiveness.How can I get rid of 200k in student loans? ›
- Refinance your loans.
- Add a cosigner to improve your interest rate.
- Sign up for an income-driven repayment plan.
- Pursue student loan forgiveness.
- Use the debt avalanche or snowball method.
After 25 years on the program, any remaining debt is forgiven. People with loans in default cannot be in the program. However, people can get their loans out of default by making a number of "reasonable" payments. Once the loan is out of default, offset of benefits should stop.What happens if you don't pay off student loans? ›
If you don't make your student loan payment or you make your payment late, your loan may eventually go into default.Will my Navient loans be forgiven? ›
Monthly payment amounts are based on family size and income. Income-driven plans also offer the possibility of loan forgiveness after 20 or 25 years of qualifying payments and can provide valuable interest subsidies. The Revised Pay As You Earn (REPAYE) plan offers the most generous interest subsidy.Are Navient loans forgiven after 20 years? ›
If you have not repaid your loan in full after you made the equivalent of 20 years of qualifying monthly payments, any outstanding balance on your loan will be forgiven.Can you settle student loans in good standing? ›
Can you settle student loans in good standing? You cannot settle federal student loans or private student loans that are in good standing. With both federal and private loans, a student loan settlement doesn't become an option until you enter loan default — and that can take up to 270 days.At what age are federal student loans forgiven? ›
Forgiveness policies primarily benefit borrowers under age 40. “Those over 60 years old benefit the least from forgiveness,” the authors write.
For students who took out loans before the 2006/07 academic year, your student loan will be written off once you turn 65. For those who took them out between the 2006/07 and 2011/12 academic years, the cut off is 25 years after the April your repayments started.Is Social Security considered income for student loans? ›
While Social Security benefits are supposed to support you after retirement, some student loan borrowers have lost that crucial lifeline. If you default on federal student loans, the government can offset your Social Security benefits as a form of repayment.How much debt is too much for a masters? ›
But how much student loan debt is too much? Your student loan payments should be no more than 20 percent of your income, and your should plan on paying off your student loans within 10 years of graduation so you can reach other financial goals, such as buying a home, Dearing says.How can I pay off my 300k student loan? ›
- Refinance your student loans.
- Consider using a cosigner when refinancing.
- Explore income-driven repayment plans.
- Pursue loan forgiveness for federal student loans.
- Adopt the debt avalanche or debt snowball method.
One rule to live by is to try to limit your total amount of student loans to a small percentage of what your expected annual salary may be from the first job you get after college. For example, you could decide that your monthly loan payment should be no more than 10 percent of your gross income.How can I get out of paying student loans? ›
- Loan Forgiveness Programs. ...
- Income-Driven Repayment Plans. ...
- Disability Discharge. ...
- Temporary Relief: Deferment or Forbearance. ...
- Student Loan Refinancing. ...
- Filing for Bankruptcy: A Last Resort.
The maximum repayment period is 25 years. After 25 years, any remaining debt will be discharged (forgiven). Under current law, the amount of debt discharged is treated as taxable income, so you will have to pay income taxes 25 years from now on the amount discharged that year.
- Qualify For A Federal Student Loan Forgiveness Program.
- Find State Assistance For Your Student Loans.
- Find Out If Your Employer Offers Tuition Reimbursement.
- Consolidate Your Federal Student Loans.
- Find A Repayment Plan That Matches Your Ability To Pay.
As a result of rolling your student loans into a mortgage, you may: Risk losing your home: Rolling your student debt into your mortgage can make your once unsecured loans secured. If you default on the loan because the payments are higher, you could lose your home since your house is the collateral for your mortgage.Can the government take your inheritance for student loans? ›
Can inheritance be garnished for student loans? Ordinarily, an inheritance can't be garnished for federal student loans or private student loans. But if you stop making payments and your loans default, a student loan lawsuit could be filed against you.
If the loan is paid in full, the default will remain on your credit report for seven years following the final payment date, but your report will reflect a zero balance. If you rehabilitate your loan, the default will be removed from your credit report.How will I know if I qualify for Navient settlement? ›
Here are the eligibility criteria: You must have borrowed a private student loan from Navient or its predecessor, Sallie Mae, between 2002 and 2014 while attending certain for-profit schools like the Art Institute, ITT Technical Institute, and others. You can see a full list of schools at navientagsettlement.com.How do I know if Navient Cancelled my loan? ›
How will I know if my private Navient loans are cancelled? Navient will notify all borrowers who are affected after the agreements receive final court approvals, according to the company.How do I know if Navient is forgiven? ›
How to Find Out If Navient Loans Will Be Forgiven - YouTubeHow do I get rid of Navient private student loans? ›
There are three ways to get rid of Navient private student loans without paying the balance in full: Qualify for debt cancellation, negotiate a settlement, or file student loan bankruptcy.Who is eligible for Navient forgiveness? ›
The private loan debt relief will primarily go to borrowers who took out private subprime student loans (made to borrowers with low credit scores) through Navient's predecessor, Sallie Mae, between 2002 and 2014, and then had more than seven consecutive months of delinquent payments prior to June 30, 2021.Who did Navient sell my loan to? ›
If Navient was your federal loan servicer, your loans have been transferred to Aidvantage.Can I negotiate my federal student loan payoff? ›
It may be possible to negotiate a student loan payoff, depending on the type of loan — federal or private — the lender or collection agency, and your loan status. Even if you're suddenly thrust into a financial crisis, you can't qualify for a student loan settlement if your loans are still in good standing.Should I pay off my student loans in one lump sum? ›
Paying off your student loans in one lump sum may have a financial benefit, but it isn't always the best move. The money might go further paying down debt with a higher rate of interest, providing the stability of a flush emergency fund or going toward your retirement savings.What percentage should I offer to settle debt? ›
When you're negotiating with a creditor, try to settle your debt for 50% or less, which is a realistic goal based on creditors' history with debt settlement. If you owe $3,000, shoot for a settlement of up to $1,500.
Eligible borrowers can see up to $10,000 of their student debt forgiven. Those who received a Pell grant while enrolled in college are eligible for up to $20,000 of forgiveness.What does the Pell Grant cover? ›
The Pell Grant is a form of need-based federal financial aid that typically does not have to be repaid, which makes it highly desirable. It is awarded by the U.S. Department of Education to help eligible low-income students pay for college costs, including tuition, fees, room and board, and other educational expenses.Do Stafford loans qualify for forgiveness? ›
Direct Loans qualify for forgiveness
That includes Direct Stafford Loans, and all Direct subsidized and unsubsidized federal student loans. Under the Direct program, Parent Plus and Grad Loans, are also eligible for the relief, said higher education expert Mark Kantrowitz.
You'll only repay when your income is over £388 a week, £1,682 a month or £20,195 a year (before tax and other deductions).What the biggest student loan you can get? ›
Dependent and independent undergraduate students can borrow up to a total of $31,000 and $57,500 in federal student loans, respectively, and many private loans set lifetime limits. Regardless of the maximum loan amount, you should only borrow what you truly need. The more you borrow, the more interest will accrue.Can I pay off my daughter's student loan? ›
Practically, yes, any parent (or anyone) can informally make student loan payments on their borrower's behalf. If you plan to make recurring payments, you could even ask your child's loan servicer to become an authorized user on the account — this way, you can log in and make payments at your convenience.What happens if you retire with student loans? ›
Student loans can't take your retirement payments from a 401k or pension. However, if you default on federal student loans, the government can garnish 15% of your Social Security benefits. You can stop the garnishment from happening by getting out of default, either with loan rehabilitation or consolidation.What happens when you retire and still have student loans? ›
While up to 15% of your Social Security payments can be garnished to repay a student loan debt, your monthly benefit cannot sink below $750. 4 Furthermore, the garnishment cannot occur until two years after you default on a loan, giving you ample time to contact the loan servicer to modify the repayment plan.Can they garnish my Social Security for student loans? ›
Key Takeaways. The U.S. Treasury can garnish your Social Security benefits for unpaid debts such as back taxes, child or spousal support, or a federal student loan that's in default. If you owe money to the IRS, a court order is not required to garnish your benefits.What's the average student loan debt in America? ›
Average Student Loan Debt in The United States. The average college debt among student loan borrowers in America is $32,731, according to the Federal Reserve.
55% of bachelor's degree recipients graduating from four-year public and private nonprofit colleges in 2020 had student loan debt. The average debt at graduation from four-year public and private nonprofit colleges was $28,400 in 2020, a $400 decrease from 2019.How much debt is a PhD? ›
The average debt among PhD holders is $159,625. 14.3% of the average graduate student debt is from the borrower's undergraduate study. The average graduate student debt is 141.8% higher than the average debt balance among all student borrowers.How long does it take to pay off $100 K in student loans? ›
While the standard repayment term for federal loans is 10 years, it takes anywhere between 13 and 20 years on average to repay $100k in student loans.How long does it take to pay off 150k in student loans? ›
How long will it take to pay off $150k: If you refinance your student loans, your repayment time will mainly depend on the loan term you choose. For example, if you refinance with one of Credible's partner lenders, you could have five to 20 years to pay off your loan.How can I pay 300k in 5 years? ›
- Create A Monthly Budget. ...
- Purchase A Home You Can Afford. ...
- Put Down A Large Down Payment. ...
- Downsize To A Smaller Home. ...
- Pay Off Your Other Debts First. ...
- Live Off Less Than You Make (live on 50% of income) ...
- Decide If A Refinance Is Right For You.
If the loan is paid in full, the default will remain on your credit report for seven years following the final payment date, but your report will reflect a zero balance. If you rehabilitate your loan, the default will be removed from your credit report.Can you pay off student loans all at once? ›
Yes, you can pay your student loan in full at any time. If you are financially able to do so, it may make sense for you to pay off your student loans early. Lenders typically call this “prepayment in full.” Generally, there are no penalties involved in paying off your student loans early.What does it mean when student loans are closed on your credit report? ›
If your credit report shows that a student loan account was closed due to a transfer, it means that your loan has been sold or transferred to another student loan servicer. This typically happens with federal and private student loans when: A borrower falls behind on monthly payments and defaults.Does the military pay off your student loans? ›
The Loan Repayment Program (LRP) is a special incentive that the Army offers to highly qualified applicants entering the Army. Under the LRP, the Army will repay part of a Soldier's qualifying student loans.