This is how I used my $6,000 student loans refund

In early December, thousands of Dollars were deposited into my account by the US Department of Education. It’s tempting to spend this money, but I wouldn’t do it until I knew more about student loan forgiveness.

Students loan borrowers were Wild ride this year. We are all getting bummed out.

September 2009, shortly after the White House Student loan forgiveness declarationI wrote an article about how refund requestFrom my federal student loans service. My student loan balance has dropped to approximately $14,000. I was eligible for $20,000 forgiveness so I requested a refund of $6,000 to maximize my debt relief.

My bank account received the refund on December 1, more than ten weeks after I placed my order. Now, I have a little more than I expected. The middle of the holiday season —but I won’t touch that money until a decision is made on student loan forgiveness. I also recommend that you do not accept a student loan refund.

Here’s how I use my refund and how to save for my student loans while we wait for the Supreme Court’s ruling regarding President Joe Biden’s student debt relief plan.

I don’t spend any refund money

Although it is tempting to use some my refund for holiday shopping or travel, I do not consider the possibility of actually paying it off.

I will return the money to my loan servicing agent to pay my balance if the Student Loan Forgiveness Program is deemed inconstitutional. I will do this immediately, even if the payment stop is still in place (it was). It was recently extended to June 30, 2023) and while interest rates are also temporarily set at 0%.

I stash my money in a high yield savings bank

When my refund was in my bank account, I immediately transferred it to a file. High yield savings accountThis account is separate from any other funds. I don’t have access to this account via a debit-card, which is a tip we recommend if there is any temptation to dip into that money.

Immediately, High yield savings accounts onlineIt has a 3% APR, so it’s possible to earn some interest while still having my money. It won’t make you rich, but it’s better that putting it in an account. Savings account of the traditional bankHe would only pay me pennies for my money.

I make monthly payments (to me)

If the Student Loan Forgiveness Programme is not implemented or remains suspended, I will owe $14,000 of my student loans. This includes the $6,000 I received in a refund. I will make my student loan payments by myself until I can be certain. Instead of paying hundreds of dollars per month to service my student loan, I deposit that money directly into a high yield savings account, where it is refunded.

This is something I do for several reasons. First, you don’t have to make payments during the payment pause. Forgiveness is possible. But since I’m able to make student loan payments right now—and was preparing just in case payments resume in January—building up my savings seems like a smart move.

If my debt is not forgiven I can still make a bigger dent in my balance when payments resume. If the debt is not forgiven, I will still allocate money to it. I pay the taxes I will owe when I am forgivenBecause I live within a state that imposes local and state taxes on the amount that was forgiven.

I recommend paying the monthly installments if you have the funds to do so while your student loans are paused. You’ll be able to save money or have extra money in case you are denied loan forgiveness.

This strategy is only feasible if you are able to afford the monthly installments. If you are unable to pay the monthly installments, I recommend applying for one. Income driven payment planTo make your student loan payments less expensive if you don’t create a debt relief plan.

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Continue reading: Pay for the rest of my life. Student loan debt is crushing an entire generation