“It will be enough for us to start talking realistically about purchasing a home,” Dara Zucker, 28, spoke about paying off school loans.
In Tampa, Florida, Zucker and her fiance had been hunting for a home. Due to the erratic housing market and her $38,877 in student loan debt, they had planned to spend $250,000 on a 1,400-square-foot house, but “we had to put that on hold.”
She said that if she received the anticipated $10,000 in debt forgiveness, “I think it will become more realistic.”
Borrowers can receive “an additional $150 to $300 per month”
Americans have been accused of being prevented from beginning families, purchasing homes, and retirement savings due to the load of student loan debt.
Many borrowers will have smaller monthly payments or none at all now that the Biden administration has eliminated hundreds of billions of dollars in student loan debt and proposed a new income-driven repayment plan that may slash monthly payments for undergraduate loans in half.

According to Jaylon Herbin, policy and outreach manager at the Center for Responsible Lending, this “gives borrowers a chance to achieve their goals.” According to him, this is especially true for Black and female borrowers who graduate with bigger sums.
“Canceling student debt will bridge that racial wealth gap and give people the opportunity to start a business, have a family and purchase that first property or home,” Herbin said.
Forgiving $10,000 per borrower equates to “an extra $150 to $300 a month in their budget” when taking into account the typical student loan payment. As a result, he continued, it is now possible to “go ahead and obtain wealth and assets.”
The White House anticipates that the increased cap on income-driven repayment plans will result in an average yearly reduction of more than $1,000 in student loan payments for both present and prospective students.
Think about the future milestones you want to reach
“For many Americans this will be transformational, for others it will just be a drop in the bucket of what they owe,” Brian Powell, an Indiana University sociology professor and the co-author of “Who Should Pay?”
Start with a plan of action, advise advisers, because any amount of money that has been freed up can be used to good effect in any case.
“When you have a plan in place, you are less likely to throw that money away,” stated Rose Niang, director of financial planning at Edelman Financial Engines.
“It’s not just a windfall, it’s an opportunity,” she said. “It’s an opportunity to propel yourself to the next level; it’s an opportunity to better your financial life.”
More than half, or 53%, of borrowers said they would use the additional money in their monthly budget to pay off other debts, followed by saving for retirement, investing, purchasing a home, or vacationing, according to a CNBC survey of more than 5,000 Americans conducted online by Momentive in August.
The best ways to invest the money, according to advisors, are as follows:
Reduce other debt

According to Carter Seuthe, CEO of Credit Summit, one of the biggest benefits of loan forgiveness is the freedom to use the money to pay down any other outstanding high-interest loans, notably pricy credit card debt.
“Given that credit card interest rates are often significantly higher than those associated with student loan interest rates, you should pay extra attention to this type of high-interest debt,” he said.
At their current all-time high, average credit card rates are close to 18%; by year’s end, they may be closer to 20%.
“With interest rates going up, that debt is only going to get more expensive,” Niang said.
Establish an emergency fund

“An emergency fund will help avoid debt traps and maintain your peace of mind,” Seuthe said.
By transferring funds that would have previously gone toward your monthly student loan payment into a savings or money market account, you may be able to significantly increase your chances of accumulating enough income to meet your long-term objectives.
Most financial professionals advise establishing an emergency fund with enough money on hand to cover costs for at least six months. However, Niang suggests that clients save for a period of time closer to a year, taking into account rising inflation and an obvious decline in the economy.
“A looming recession could impact employment,” she said. “If you have a job that is pretty recession proof, then maybe you need three months. If you have a very specific job that is highly impacted by the recession, then definitely having 12 months is what we would recommend.”
Contribute more to your retirement account

If you currently have a sizable emergency fund, take your retirement savings into account.
“If student debt has affected your ability to save for retirement, use the additional monthly income not spent on student loans to open or contribute to an individual retirement account, 401(k) or other retirement savings plan,” remarked Dan Casey, the man behind Bloomfield Hills, Michigan’s Bridgeriver Advisors.
Casey advised saving 10% of your income for retirement. “If you have a company plan, at least be contributing enough to get the employee match,” which will assist you in achieving that goal, he continued.
Open a Roth IRA if you don’t already have one, he suggested. If, for instance, an account user wants to use the money for a down payment on a house down the road, they can withdraw their contributions at any time without paying taxes or incurring penalties. (The maximum IRA contribution limit for 2022 is $6,000).
Once your debt has been eliminated and your short- and long-term savings are healthy, then “consider putting some of the money you’d use on student loans towards a reward — maybe a trip or something you’ve always wanted to buy,” Casey said.
“The stress of having student loans has likely taken a toll,” he said. “Give yourself a little gift.”