An astonishing 46% of student loan forgiveness applicants plan to use their debt relief dollars to go on vacation. While millennials may not be able to afford a home for another ten years, thanks to Biden’s plan to ease student loans, their dream vacation may become a more realistic goal.
Intelligent.com recently conducted a survey of 1,250 people who applied or plan to apply for the assistance program to see how recipients would use their extra money.
While the student loan write-off program won’t result in a cash windfall, recipients will see their balances drop to $20,000, potentially reducing monthly payments by several hundred dollars. While many applicants plan to use cash to help balance their monthly budget, some intend to get a little more creative with their spending.
3 out of 4 recipients plan to spend on non-essential expenses
According to interview73% of applicants for loan assistance reported that they were more likely to spend the extra money on non-essential items. 84% of men said they would use the extra money in this way compared to 65% of women.
52% of applicants say they are “very likely” or “likely” to buy items such as new clothes or accessories with their extra funds. 46% say they would use the money for vacations, and another 46% said they would use the money for dining out at restaurants.
Other items that applicants say they will spend extra money on include:
- 44% said they would buy a new smartphone
- 43% said they would invest in stocks
- 42% said they would use them to buy gifts.
- 36% said they would buy a new gaming system
- 30% said they would put it before the wedding.
- 28% said they would buy drugs or alcohol
- 27% said they would use it for gambling
Do as I say, not as I do
While the vast majority of applicants said they would spend more money on non-essential expenses, the majority also acknowledged that this was not the smartest course of action. 73% of those surveyed agreed that using credit concessions to buy basic necessities is wrong. Politically, only 12% of Democrats think it’s acceptable to spend loan aid on non-essential needs, while 7% of Republicans think the same.
The apparent gap between those who say it’s wrong to spend money on non-essentials but plan to spend money on holidays or eating out is intriguing. Often there is a feeling of guilt due to the fact that you spend unexpectedly fallen on you “free” money. In addition, the pandemic, followed by rampant inflation, has robbed the lives of many people of pleasure.
According to Greg Wilson, a Chartered Financial Analyst (CFA), sometimes finding a balance between enjoying life now and saving for the future can be a more sustainable financial move. It suggests that whatever the borrower does with debt forgiveness can be something other than all or nothing. “Try to use the majority of your loan forgiveness to pay off your debts. But also use it as an opportunity to think about your expenses,” says Wilson. “Consider using this time to rethink your budgeting strategy. Then, after you develop a budget plan, reward yourself with a little credit forgiveness and enjoy unburdening some of your credit.”
Many use debt relief to make ends meet
On the other hand, many recipients claim that they are more likely to use extra money for essential purchases. 75% of respondents said they would spend money on groceries, 66% said they would spend it on rent/mortgage, and 65% said they would use it to pay off credit card debt. Another 62% said they would use it to pay for transportation costs such as gasoline, 60% said they would spend it on medical care/debt, and 40% said they would pay for childcare.
Not surprisingly, with rising food and housing costs and deteriorating labor marketbudgets are tight, and the promised debt relief will be a welcome relief.
Respondents were asked how student loans have affected their lives. 60% said it affected their lives “somewhat negatively” or “very negatively” and only 8% said “not at all negatively”. According to the survey, men are more likely than women to say that student loans have not had a negative impact. 47% of men made this statement compared to 34% of women.
How to apply
The US Department of Education has created a website specifically for student loan relief. Applicants simply go to the site and fill out an application. You will need to provide your name, date of birth, social security number, phone number, and email address.
Applicants will be required to check the box that certifies under penalty of perjury that they meet the program’s income requirements of $125,000 for individuals or $250,000 for couples. You could qualify for an exemption if you were eligible in 2020 or 2021.
Although the department did not elaborate on the exact process for processing applications, they said they plan to note any inconsistencies. Marked individuals may be required to provide additional documentation to verify their income.
Borrowers look forward to help
Biden’s relief plan provides for the cancellation of up to $10,000 of federal student debt for borrowers and an additional $10,000 in aid for people who receive a Pell grant. Republicans consistently say the relief plan is “economically unwise and downright unfair” and say it won’t reach those who really need it.
The Department of Education has faced several lawsuits challenging the forgiveness policy. A federal appeals court blocked the relief plan on Friday, October 21st. This decision will suspend the cancellation of the loan until the judge makes a final decision in the case.
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This article was produced by Wealthy Nickel and syndicated Geek Wealth.
Andrew Herrig is a financial expert and financial nerd, and the founder of Wealthy Nickel, where he writes about personal finance, part-time jobs, and entrepreneurship. As an avid real estate investor and owner of several businesses, he has a passion for helping others create wealth and shares his family’s experiences on his blog.
Andrew holds a Master’s degree in Economics from the University of Texas at Dallas and a Bachelor of Science degree in Electrical Engineering from Texas A&M University. He has worked as a financial analyst and accountant in many aspects of the financial world.
Andrew’s expert financial advice has been featured on CNBC, Entrepreneur, Fox News, GOBankingRates, MSN and more.