Thousands of borrowers who have had their student loans forgiven, suspended or reduced have the opportunity to repurpose the money they allocated for payments to enhance their financial security.
“Understand, this is a marathon, not a sprint. We want things fast but building wealth doesn’t happen over night. Push forward, have hope and be maniacal to your financial goals every day,” advised Andre Creighton, finance leader, startup founder and host of the Financially Fit podcast on the ShelettaMakesMeLaugh.com platform.
A Biden-administration plan that would have canceled loans up to $20,000 per person was stuck down by the Supreme Court. But $168.5 billion in student college debt impacting 4.8 million borrowers has still been erased through various loan forgiveness programs, according to the US Dept of Education.
Through the Saving on a Valuable Education (SAVE) plan, another 8 million borrowers are going into a forbearance when they will not have to make student loan payments, and no interest will accrue.
Other borrowers have achieved some relief by seeing their required monthly payments slashed or suspended. In Minnesota, 15,400 borrowers have had nearly $1 billion in loans discharged through the public service loan forgiveness programs.
Additional loan forgiveness programs that are now tied up in the courts may become available to provide additional relief to some borrowers.
“People who have had their debt forgiven or reduced need to get a financial adviser and make a plan for that money,” Creighton said. “Build that nest egg with four to six months of living expenses. Look at life insurance to protect your family. Then start investing and begin to create wealth and security.”
Creighton notes that because of longstanding racial economic disparities, more college students of color come from lower-income backgrounds and can rely on only a fraction of the financial support of their white counterparts.
“Black Americans have faced barriers to employment and home ownership and as a result have traditionally had less wealth to cover education and then pass down,” Creighton said. “It’s a proven fact that our white counterparts have more ability to help their kids get to and through college.”
According to the Brookings institute, the average white family has roughly 10 times the amount of wealth as the average Black family. It’s estimated that 86% of Black students take federal loans to attend four-year colleges, compared with 60% of white students. Black students graduate from four-year colleges with $7,400 more in student debt.
“We have been going to college but there’s still a wage gap. People have taken on the debt but are not finding the jobs that pay. Living check-to-check, they don’t see their situation changing,” he said.
Creighton advised folks to be serious about budgeting, living below their means and resisting impulsive purchases to pay off debt and begin saving and investing. Most of all, the encourages them to have a plan.
“You don’t get out of your situation if you are not planful. I always say, it’s not about how much money you make, it’s about how much money you keep. Ask yourself, where do I want to be in five years, ten years? What do I want for my kids?”
The birth of his own son two years ago prompted Creighton to double down on his plan for disciplined savings.
“I may never see the wealth I am building, I may not reap the benefits from it, but I hope my son and the generations after him can,” he said. “Planning for next generation is immense. You have to be able to think beyond today.”