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How forgiven student loans jumpstart your wealth and what that means for inflation
Hi there! I’ve been taking some time off from this blog but I’m roaring back after the biggest decision after student loans happened this week. Here’s what I’ve been up to this month:
Secured a great second form of income (still tied to my time though)
Invested 30% of my leftover monthly savings in QQQ as stocks continue getting wrecked. 10% into crypto.
Getting adjusted to my new 9-to-5 job. Loving it so far!
I'M DEBT FREE THIS WEEK
With my student loans being my only debt at $6K remaining, I’m excited to announce that I’m debt free after the federal government’s decision to forgive student loans. I have been paying aggressively with the snowball strategy, targeting the highest interest rate loan since 2017 and pausing when the pandemic began.
Do I have any regrets? Sure, I could have made use of the full $10K forgiveness but you can’t do anything about hindsight. In 2020, I posted an Instagram poll asking if I should pay off the remaining debt or pray for federal forgiveness.
At a time when only 1.2% of borrowers continued paying although payments were on pause, waiting was the best choice for my circumstances. I’m grateful this benefits my personal situation and the lives of millions of Americans. Let’s see how we’re feeling about inflation near the end of this post.
Do You Qualify?
If you’re thinking you may not qualify, read through the above statement regarding Biden’s Studen Loan Debt Plan. Essentially, if you earn less than $125K you qualify for some form of forgiveness.
For those (many) folks who continue to owe an amount, my favorite piece of this plan is the 5% cap repayment of your monthly income near the bottom. This is designed to ease individuals back into payments to the government instead of paying during a time of rampant inflation.
In 2016, I made a friend over lunch and she told me that she had over $500K in student loans for having gone to a prestigious out-of-state school for graphic design. As she asked me for financial guidance, we worked through a personal plan of how to get her on track for repayment. Plans like these are the first step in guiding America toward higher education, not at the burden of crushing debt as tuition increases year over year.
What Does This Mean for Inflation?
There are two sides to the argument and I’m entertaining both options now. Let’s review the first scenario:
Certain economists are arguing that forgiveness will have minimal impact on inflation. According to an article in the Atlantic, debt forgiveness will actually boost the economy as people use their free time and energy to pursue jobs around the country and build businesses, creating jobs. There’s another idea here where people aren’t going to increase their spending habits simply because their balance sheets saw a deduction. As consumer spending habits impact inflation, studies show that no change to spending habits typically happens when the money isn’t tangible as in an actual salary bonus.
On the other hand, this forgiveness plan is expected to wipe out $321 billion in federal student loans. While money is this made-up idea, the impact will cap government spending for years to come as a form of revenue has been cut for our government. There’s an ongoing meme where the colleges will raise their tuition by $10K for this reason. Lastly, future politicians may increase taxes to supplement the U.S. as a form of replaced income. Biden’s already started in increasing taxes on the wealthiest Americans.
How has this decision impacted you? Are you foreseeing further inflation in the future? Leave a comment and let us know!
Have a great week ahead,
Jordan