So, You Didn’t Get Your Student Loans Forgiven? What Now?

By Geoff Schaefer

Geoff is a Wealth Advisor with Intergy Private Wealth. He writes for The Steadfast Fiduciary to help people live with an abundant heart, open mind, and boundless generosity.

June 30, 2023

The Supreme Court decided that the Biden administration’s student loan forgiveness plan was unconstitutional and would require congressional approval to move forward. Given the incredible unlikelihood of that occurring, that $10,000- $20,000 of loans that many were counting of being discharged are back due and payments begin next month. What should you do if you are one of the millions in this situation?

  1. Don’t panic. Either outcome of this decision was always completely out of our control.  Much of planning is controlling the few things you truly can and learning to roll with everything else.  I talked about that more in a previous blog post you can find here: A Ride Around the Block
  2. Reassess your debt situation.  Was this the only non-mortgage debt you had on your balance sheet? Are there other car loans or credit cards?  Use an online net worth tool, excel document or napkin to get a good picture of what you own versus what you owe.  Then track down what the interest rates are for every debt balance.
  3. Determine a realistic and appropriate timeline to have your student loans paid off. While paying off debt is important, it is more important to grow your balance sheet over time.  This often means investing in assets like mutual funds, stocks, bonds, and real estate while paying off debt. If you are making $50,000 a year and have $20,000 of student loans, it is likely a very unrealistic and imprudent goal to pay them off in one year.  What is more realistic is a four or five year plan, while continuing to pay current bills and invest for the long term. Once you determine what timeline suits your goals, plan and lifestyle, time to prioritize the debts.
  4. Determine the minimum monthly amount it takes to pay off the loans by your stated goal. Once that is done, pay off the highest interest loans most aggressively and target lower interest loans later. Most student loans are relatively low interest, so if there are other consumer debts, it may be a good reason to extend the student loan payback goal to get the other debts paid first.  Use a debt reduction tool to help determine this priority.  Here is a great one available online: Vertex Debt Reduction Calculator
  5. Start paying it back.  It is not fun and probably will not be over quickly, but with a plan it is achievable. Put the plan in place and stick with it.  Just like investing plans do not make you rich overnight, a debt payment plan will not make you debt free instantly.  It will require some patience and determination.

Loans are required to be paid back. Used prudently, student loans can lead to higher earning potential and better career satisfaction. I wouldn’t lament the politics of this whole situation or feel regret on the education choices you made that are well in the past.  Use this as a good opportunity to check in on your financial plan and ensure your net worth and financial flexibility is trending in the right direction over the coming years and decades.

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