What to do now that your student loan debt just shrunk by $10,000?

SALT LAKE CITY — You just had your student loan debt seriously chopped by President Joe Biden. A financial expert has advice on your best steps forward.  

President Biden on Wednesday announced plans to deliver on a campaign promise and provide $10,000 in student debt cancellation for millions of Americans. 

Big student loan forgiveness plan announced by Biden

The Penn Wharton Budget Model found the total cost of the proposal could be $329 billion over 10 years.

Utah borrowers carry an average of $32,835 in student loan debt. At the top of the list, former and current students in Washington, D.C. are saddled with $54,945 in loan debt, according to Education Data Initiative.

Money wisdom

Shane Stewart, certified financial planner for Deseret Mutual Benefit Administrators, joins KSL NewsRadio’s Dave Noriega and Debbie Dujanovic. He discusses what show Producer Caitlyn Johnson should do now that her student loan debt. In an instant, it has just been reduced from $13,500 to $3,500, wiping away 6 1/2 years of loan payments.

“The whole idea of being financially independent is to run from debt. The worst thing she could do is run to debt, meaning, [she may be thinking] ‘Oh, wait, I have an additional couple $100 a month I could spend, why don’t I go get a new car or some other debt to fund. That’s the probably the worst thing that could be done.”

Student loan debt

With the loan reduction, Stewart said, comes a lower monthly payment. He urged Caitlyn to keep paying the same monthly payment to reduce her student loan to zero as quickly as possible. If not, she adds the 6 1/2 years back to the loan schedule.

“So, keep the foot on the gas with the monthly payment,” he said. “If you had a $200 month payment and now it’s $100, well, maybe pay at least $150 or more, but keep something going to get that timeframe down and get rid of [the debt] quicker.”

Caitlyn said she is committed to doing exactly that.

“I will say that $3,000 over $13,000 is just like way easier to look at,” she said.

 

Dave & Dujanovic can be heard weekdays from 9 a.m. to noon. on KSL NewsRadio. Users can find the show on the KSL NewsRadio website and app, as well as Apple Podcasts and Google Play. 

Read more:

• Sen. Romney introduces bill to prevent cancellation of student loans
• Utah students await an announcement on loan forgiveness