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President Joe Biden’s announcement regarding widespread student loan forgiveness freed an estimated 20 million borrowers from student loan debt, allowing borrowers to breathe a sigh of relief and begin thinking about their other financial goals.
While political rhetoric has certainly picked up following the decision, there’s still reason to rejoice for the millions of Americans who can finally move forward, focus on other financial priorities and start making major life decisions such as whether or not to get married, launch a business or start a family.
As the celebrating continues, it’s also important to create a plan and take advantage of this sudden windfall. Select spoke with Lauren Anastasio, director of financial advice and certified financial planner at Stash , a popular investing app, about the next steps that would be best for those who are now without student loan debt .
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Our best selections in your inbox. Shopping recommendations that help upgrade your life, delivered weekly. Sign-up here . What debt-free student loan borrowers should do next
Wednesday’s announcement comes on the heels of nearly 2.5 years of a federal student loan repayment pause and allows for one final extension through Dec. 31, 2022. Those who qualify within certain income limits and have less than $10,000 in student debt — or less than $20,000 for Pell Grant recipients — will now be free of their federal student loans.
According to Anastasio, there is still one more important step needed to make it official: Make sure you get it in writing that your student loan debt has been paid in full.
“You should receive a congratulatory letter from your servicer confirming that your loans have been paid off. Save this letter. You may receive it electronically or be able to access it through the servicer’s website, but you will want to have a copy for your records just in case,” Anastasio says. “After 60-90 days, you’ll also want to consult your credit report to see that all applicable loans have been updated to reflect that they have been paid and closed.”
As you wait for your official documents to come in, it’s a good time to start coming up with a plan for that additional money you would otherwise have been putting toward your loans.
“Take the time to think about what you want to make happen for yourself so you don’t lose track of the money and wind up spending it on things that aren’t meaningful to you,” said Anastasio. For example, don’t run out and lease a new car if you already have a vehicle that meets your needs. You’ll just be signing up for another form of debt when taking out a car loan or leasing a vehicle — and cars are considered a an asset that loses value over time.
Here are three important things you should focus on doing next as your financial priorities shift beyond student debt. Replenish your emergency fund
Anastasio recommends filling your emergency fund to the point where you’d have enough to cover three to six months worth of living expenses. This is a great first step since it helps to provide a financial safety net in case something unexpected arises, such as a job loss, costly car repair or housing fix.
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