After Biden's Loan Forgiveness: What's Next for Me?

Financial Windfall: What to Do After Your Student Debt is Forgiven

Hey Kristin, When President Biden wiped away up to 20 grand in student loan debt for millions of Americans lately, I was among those lucky few. I've been left wondering though - what now? Sincerely, Guess Who's Debt-Free Soon

Dear Debt-Free Soon, Well, what great news indeed! I can see why you wouldn't want to squander this opportunity to boost your financial situation. There isn't a one-size-fits-all answer to your query, unfortunately. It all boils down to your individual financial state.

You haven't disclosed the amount of debt pardoned, but according to the loan simulator on the Federal Student Aid site, if you were enrolled in a public four-year college, clearing up a $27,000 loan would take around a decade with a monthly payment of $272. That’s close to an extra 300 bucks you can use to improve your finances.

First and foremost, ensure that the funds previously directed towards your monthly student loan payment find a place in your budget. What you'd want to avoid is letting spare cash sit in your account only to be spent on dining out or shopping. Allocate that money wisely, whether it's towards savings, debt repayment, or any other useful purpose.

Got other debts weighing you down? High-interest debt like credit card balances can snowball costs. This might be the perfect opportunity to clear them off. Similarly, if you've taken out a home or auto loan, deliberating extra payments can shorten your loan term and save you heaps on interest.

Don't limit yourself; you can multitask when it comes to managing finances. Consider shoring up your emergency fund to cover at least six months' worth of expenses. If you're already sitting pretty in terms of savings or debt, think about investing a slice of your windfall in the market. With recent market dips, now's a great time to snag assets on sale and reap the rewards when the market rebounds.

Don't forget to have some fun too! Whether it's treating yourself to a vacation or splurging on something you've been eyeing, there's no harm in enjoying a little of the financial boost, provided you do so consciously and not recklessly. -Kristin If money matters are on your mind, Kristin is just a message away. Drop an anonymous question her way and you might see it addressed in a future feature!