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If Biden Forgives Your Student Loans, Use The Extra Cash For These Goals – Forbes

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After President Joe Biden’s historic student l…….

Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors’ opinions or evaluations.

After President Joe Biden’s historic student loan forgiveness announcement, millions of Americans are taking a second look at their finances.

Federal student loan borrowers are eligible for up to $10,000 or $20,000 in debt cancellation, as long as they earn less than $125,000 annually (or less than $250,000 if filing taxes jointly). Up to 43 million borrowers will see some amount of forgiveness, according to the White House, and about 20 million borrowers will have their entire debt forgiven.

If your student loans will soon be erased and you have a few hundred extra dollars in your monthly budget, review your goals and decide where that money could be best put to use.

4 Savvy Ways to Use Extra Money

Depending on what you hope to accomplish, your extra money could help you do one of the following:

1. Boost Your Emergency Fund

With a well-funded savings account, car repairs, surprise medical bills or sudden unemployment don’t have to totally derail your budget. An emergency fund gives you some padding when the unexpected happens, and it can protect your finances as well as your peace of mind.

A common rule of thumb is to save three to six months’ worth of your normal living expenses. To determine what’s right for you, consider how reliable your income is, how easy it would be for you to find a new job, how many people you financially support and if you have a partner or family who can support you for a time.

Think about other factors that could affect the amount you save, too. For example, if you have an older pet that’s likely to need veterinary care or your refrigerator is on its last legs, you might consider saving more.

Once you’ve determined how much to save, you can set up automatic contributions to your emergency fund until you’ve reached the desired amount.

2. Pay Off Other Debts

After your student loans are out of the way, turn your attention to other loans or credit card debt that may be weighing you down. There are two common strategies to determine which debts to tackle first: the debt avalanche or debt snowball methods.

With the debt avalanche method, you’ll pay off your highest-interest debt first. Start by listing all your loans in order of interest rate. You’ll continue to make the minimum monthly payments on all of your debts while putting any extra money you have toward the highest-interest loan. Once that is paid off, focus on the next loan with the …….

Source: https://www.forbes.com/advisor/student-loans/student-loan-forgiveness-extra-cash/

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