You’ve probably heard about President Biden’s student loan forgiveness announcement.
- This could be the perfect opportunity to start investing, pay off other debt, or boost investments you’ve already been making.
- The first way you should invest this money is to create a cash reserve so you have the cash on hand, just in case.
- On the one hand, you may simply want to focus on paying off all of your loans to become debt free. On the other hand, investing may seem more appealing if you think you could get a decent return on your money.
This news has been spreading and many people are wondering if they qualify or not. Those who qualify are excited about the potential of an additional $10,000 available to them now that they don’t have to worry about paying down debt.
It is well known that the financial burden of student loans prevents many people from buying real estate and building wealth. That’s why taking advantage of this student loan forgiveness program is so essential.
Let’s get worried and see how you can invest $10,000 after confirming student loan forgiveness to build your wealth and focus on establishing your financial health.
How do you know if you qualify for student loan forgiveness?
Nearly 8 million Americans immediately qualify for student loan forgiveness without any application. If your annual income is less than $125,000 (or $250,000 as a married couple), you’ll qualify for $10,000 of student loan forgiveness.
The Federal Student Aid website has stated that relief can be expected within 4-6 weeks of applying. The website recommends completing your application by November 15, 2022 if you want to see relief before 2023.
If you qualify, you will have freed up $10,000 that you can now invest. This money should be used to create a financial boost for millions of Americans.
How should you invest $10,000?
Here are the best ways to invest money you no longer need to put toward your student debt.
Create a cash reserve
The first way you should invest this money is to create a cash reserve so that you have cash on hand if something bad happens. Some experts recommend that you put aside three months’ worth of expenses as a cash reserve to help you handle a potential job loss or other type of disaster.
Your parents or grandparents have probably advised you on the importance of saving money for a rainy day. Think: your car breaks down, a broken bone, or any of life’s unexpected consequences.
If you already have a cash reserve fund, we suggest you fill it out to make sure you have enough money to be ready for whatever life throws your way.
Start saving for retirement
The earlier you start saving for retirement, the more comfortable your life will be in your golden years. Saving for retirement is not something you do later in life. While getting older is the last thing on your mind when you’re young, you need to plan for your older self so you don’t get stuck working more than you want to because you didn’t prepare.
How can you start saving for retirement?
- See what options your employer offers. Determine if your employer matches your contributions to the company-sponsored 401(k) plan.
- Set aside money from each paycheck. Individual Retirement Accounts (IRAs) and 401(k)s allow for tax-deferred or tax-free growth. They are available in traditional or Roth options.
It’s important to start planning for retirement as soon as possible so you don’t have to spend your golden years working when you could be relaxing with your family.
Invest in index funds and stocks you believe in
Have you been thinking about trying to invest in the stock market? Since you’ll have more money to invest, you’ll want to put some of your money where it will grow.
It’s usually best to start investing in index funds that contain companies you believe in. You may want to take a risk by investing in individual stocks, but it is wise to wait until you are more experienced and confident as an investor. Sometimes the best investments are the boring ones that deliver consistent results. Aiming for 6% to 8% over the long term will provide great growth over time.
Invest in you/your development
This $10,000 could be put towards your personal development or professional growth. You may have heard that the best investment comes from investing in yourself. Increasing your skills and knowledge will result in more income, helping you accumulate more wealth over time.
How can you invest this money in yourself?
Take that course you’ve been thinking about. Are there any courses that can improve your position at work or help you earn more money?
Learn a new skill. Could you use this money to acquire a new skill, such as graphic design, coding, sales, or writing?
Try a community college program. Since your debt has been forgiven, you can use this money to further your education at a community college near you.
This $10,000 in aid could be the financial help you need to make a career change or advance your mind.
Pay off your other debt
While this isn’t technically an investment, you can use this money to take on other debt. Chances are, $10,000 won’t be enough to eliminate all of your student loans. While $10,000 is nothing to scoff at, you may not be completely debt-free after your student loan is forgiven. You may also have additional federal and private student loans, depending on the amount of financial aid you have received for your studies. You may also have other debts ranging from credit card debt to a car loan. Use the money you set aside for your student loan payments to reduce your overall debt load.
What you shouldn’t spend the $10,000 on
As we discuss the best ways to invest this student loan forgiveness money, it’s only fair that we discuss what not to invest in so you don’t miss out on this once-in-a-lifetime opportunity. It can be tempting to chase the promise of high returns that are “guaranteed” by some random person on social media. Remember: if it sounds too good to be true, it usually is.
Here are some ways you shouldn’t invest this $10,000:
- Buy meme stocks based on hype and speculation. While Reddit and social media are full of meme stock success stories, many people lost money on these investments because they chased the hype without doing research.
- Random cryptocurrency tokens you hear about. Many innocent people have lost money in cryptocurrencies because they chased the ridiculous returns that the tokens promised them.
- Penny stocks and other risky investments. High risks come with high rewards, but they also have the potential to lose all of your money.
The purpose of this student loan relief is to help ease the pressure on your finances. Don’t make things worse by taking unnecessary risks.
The last word on the $10,000
If you find out you’ve been approved for student loan forgiveness, $10,000 of your balance will be lost, which should significantly lighten the financial burden of student debt. This could be the perfect opportunity to start investing, pay off other debt, or boost investments you’ve already been making.
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