Student Loan Forgiveness and How to Balance Debt Against Your Other Financial Goals


Key points to remember

  • Biden has forgiven student loan debt for millions and is extending the loan payment break.
  • Borrowers should consider the loan interest rate, minimum payment, and compound interest rate of their retirement account when deciding whether to fund their student loan repayments alongside saving for retirement.
  • Financial goals go beyond student loan repayment. Individuals should also ensure that they have a strong credit rating, a defined budget, and strategic investment portfolios.

How likely are your student loans to be forgiven?

In remarks he made at Joint Base Andrews in late July, President Biden said he would announce his decision on student loan forgiveness in late August, having already paid off nearly $32 billion in student loans since the start of his presidency.

Just last week, the Department of Education stepped in and canceled $3.9 billion in student loans for those attending ITT Technical Institute. According to U.S. Secretary of Education Miguel Cardona, “ITT executives intentionally misled students about the quality of their programs in order to take advantage of federal student loan programs, regardless of the hardship that would entail.”

ITT’s student loan forgiveness gives some borrowers hope that their loans will also be forgiven. But whether or not your loan is forgiven, there are financial goals you should plan for, with or without balancing the burden of student loan repayments.

How can you determine if your loan will be forgiven?

It is essential to understand the terminology used when talking about student loans. Forgiveness, cancellation and release are similar terms, but they are used differently:

Forgiveness/Cancellation: When a person’s job waives their responsibility to pay their student loans.

Dump: When another factor, such as the closure of a school or a disability, exempts a person from having to repay their loans.

Current forgiveness programs

It is important to note that there are specific eligibility criteria for these programs, and not everyone may be eligible.

  • Cancellation of civil service loans is for employees of government or non-profit organizations.
  • Teacher loan forgiveness is specific to teachers who have taught for at least five years in a low-income school. This program can withdraw up to $17,500 from their loans.
  • School outing closed is intended for pupils whose school closes halfway through their studies or shortly after their withdrawal from the establishment.
  • Perkins Loan Cancellation and Release is for borrowers who took out Perkins loans, which were intended for students with significant financial need.
  • Total and permanent disability leave for people who are totally and permanently disabled.
  • Release due to death is for those who die before repaying their loans.
  • Discharge in case of bankruptcy is intended for individuals who declare bankruptcy.

Will I have to start making payments soon?

Former President Donald Trump suspended student loan payments on March 13, 2020 due to the COVID-19 pandemic. President Biden continued that hiatus when he began his presidency, and has just extended it for the seventh time.

The devil is always in the details, but the outline we have indicates that federal student loan borrowers who earned up to $125,000 in annual income (or $250,000 as a joint filer) during the pandemic of Covid-19 will qualify for a substantial student loan. forgiveness.

Should I fund my retirement account or pay my student loan?

There are some factors to consider before deciding whether or not to fund your retirement account while paying off your student loan.

Interest rate

If the interest rate on your student loan is high, you will want to pay as much money as possible to pay it off quickly. Each month that you carry this loan, you incur additional costs from the loan interest.

Conversely, if you have a low-interest loan, you may be able to stratify your funds toward saving for retirement and paying off the loan.

Compound interest

Compound interest, or interest on interest, can help grow a retirement account quickly. So the sooner you start saving for your retirement by taking advantage of compound interest, the more financially secure you will be later on.

You don’t want to miss out on the benefits of compound interest by focusing on paying off a student loan, unless the interest rate on the loan is so high that you’ll lose more money in the long run than you would. earn by saving for retirement.

Minimum payment

Make sure you know the minimum payment on your student loan and pay at least that amount each month so you don’t default.

Depending on the interest rate on your loan and the interest rate on your retirement account, you may need to consider whether it makes sense to pay the minimum student loan payment to maximize your retirement. Alternatively, you can pay off your student loan as quickly as possible and not spend so many funds on retirement.

Life goes on after student loans.

Although paying off student loans may seem like a daunting task, you have a life beyond that debt. Whether or not your student loan is forgiven, you should have a comprehensive set of financial goals to consider in conjunction with paying off your student loans.

Three priorities for people with student loan debt

Here are three things to prioritize to ensure your financial situation stays on track while paying off your loans.

Credit score

Ensuring you have a strong credit rating will help you have the most financial opportunities in the future. A credit score is tied to your likelihood of being approved for other loans, rental properties, and credit cards. The stability of your credit score can determine the rates you pay on these loans and credit cards. Generally, the better the credit score, the lower the rate.

You can ensure your credit score is strong by paying off loan and credit card payments on time, whenever they’re due, without fail.


Your income must be greater than your expenses to have money to save. But with inflation hitting a 40-year high earlier this year, you probably feel like your money isn’t covering the costs like it used to.

When setting a budget, consider the following:

  • Your income after taxes.
  • How much money you spend each month on expenses, including mortgage or rent, utilities, loan payments, food, gas, and any other necessities.
  • How much you spend on superfluous things like entertainment and restaurants.
  • How much you want to set aside to save and invest.

If all of these expenses exceed your income, you need to cut out some discretionary extras so you have money to spend on future student loan repayments.


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By securing a strong credit score, developing a defined budget, and creating a strategic investment practice, individuals can achieve their financial goals while paying off their student loan debt.

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