Biden Forgave My Student Loans. Now What?

Our editor-in-chief on what to do if you got student loan forgiveness

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The Balance/Alice Morgan

Dear Kristin,

When President Biden forgave up to $20,000 of student loan debt for millions of Americans this week, I was one of the borrowers that qualified for my student debt to be erased. But now I don’t know what to do with the money I’ll save. So what should I do? 


Soon-to-be Loan-Free

Dear Loan-Free,

Wow! This is an amazing opportunity and I can understand why you wouldn’t want to waste the chance to bolster your financial situation. There is no right answer to this question unfortunately, and it really all depends on your financial situation.            

You haven’t shared how much debt you had forgiven, but using the loan simulator on the Federal Student Aid site, it would take 10 years to pay off a loan that is about $27,000 for a public four-year college, with a monthly payment of $272. So this is close to an extra $300 you can use to improve your finances. 

First, make sure to incorporate the funds that would have gone toward that monthly student loan payment into your budget. What you don’t want is to have extra money in your bank account that just ends up getting spent on dining out or shopping—at least not if you want to use it for other things. So earmark that money and divvy it up among savings, debt repayment, or something else that you might find useful.

Do you have any other debt? Some debt—like credit cards—carries high interest rates that will end up costing you a lot of money. If so, this is a good time to pay it off. Or, if you’ve purchased a car or a house, consider making extra payments to your loan. By increasing your payments, you can cut the total length of your loan, which could save you thousands of dollars in interest.

This doesn’t have to be the only thing you do. We can walk and chew gum at the same time, and the same is true with our money. I would also recommend you bolster your savings to make sure that you have at least six months’ worth of expenses set aside for emergencies. 

But maybe you already have a robust amount saved or your debt paid off. Then I would turn to investing some of the money into the market. Markets are down nearly 12% since the beginning of the year, which means it’s a good time to buy up assets on the cheap so that when the market flips into a bull market, you’ll benefit. Historically, the average bull market has lasted 6.6 years with an average cumulative return of 339%.

One of the last things to consider is having fun! If you want to go on a vacation or buy yourself something, there is nothing wrong with using this boost to your income to get yourself or your loved ones something that you’ve been wanting. Especially if you are already on financially sound footing. Just make sure you are intentional in your spending and you don’t fritter your windfall away on things you’ll regret.


If you have questions about money, Kristin is here to help. Submit an anonymous question and she may answer it in a future column.

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  1. Wells Fargo. “Loan Amortization and Extra Mortgage Payments.”

  2. S&P Global. “S&P 500 Overview.”

  3. University of Idaho. “History of U.S. Bear & Bull Markets.”

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