Used accident settlement to pay off FAFSA loans for potential adoption - now what?

congrats on being debt free!! thats HUGE. my sister just adopted last yr and yes getting rid of her student loans was a big factor in approval. just make sure u get documentation that proves the loans are paid in full, u might need it for the home study

This is actually a great use of settlement money. To properly close out your student loan account, log into studentaid.gov and download your payment history and the official paid-in-full letter. Keep these documents forever! Your credit score will likely jump 30-50 points within 60-90 days as the accounts update to zero balance and then closed status. For adoption financial approval, agencies typically want to see 3-6 months of financial statements after major debt payoffs, so start organizing those statements now. They'll want to see that you have stable income and some savings aside from the lump sum payment you made. One thing to consider: if you ever need to return to school, you'll still be eligible for new federal loans despite having paid these off. Your lifetime loan limits don't reset, but if you were nowhere near them, that's not an issue.

I'm actually going through something similar right now - trying to improve my finances for fostering! Would you mind sharing how much your debt-to-income ratio improved after paying off the loans? Was it just federal loans or did you have private ones too? I'm trying to figure out if I should focus on paying down my FAFSA loans first or my car loan which has a higher interest rate but lower balance.

Congratulations on becoming debt-free! I work in financial counseling and can confirm this was a smart move for adoption qualification. To officially close everything out: 1. Download your paid-in-full letter from studentaid.gov 2. Request a letter from your loan servicer as well (sometimes these have more details) 3. Get your credit reports from all three bureaus in about 60 days to verify the accounts show as paid 4. Keep an eye on your credit score - expect a 40-70 point increase within 90 days For adoption financial qualification, most agencies will want to see that your debt-to-income ratio stays low for 3-6 months, so maintain good financial habits. They'll also look at your savings, so try to build that up with what you would have been paying toward loans. I know using a settlement this way might feel bittersweet, but from a financial perspective, you've eliminated interest-accruing debt which is almost always a smart move.

my FAFSA loans were the worst financial mistake of my life. spent 12 yrs paying and owed MORE than when i started!!! the system is totally rigged against us. wish i'd gotten a settlement to wipe mine out - you made the right call even if it wasn't what u planned. i dont know anything about adoption rules but less debt is ALWAYS better imo

Have you tried calling the Federal Student Aid Information Center to confirm your account is properly closed? When I paid off my loans last year, there was some weird administrative issue that didn't properly mark one of my smaller loans as paid. Took forever to get someone on the phone though - I kept getting disconnected or waiting for hours. Finally used Claimyr (claimyr.com) to get through to a real person. They have this service that basically holds your place in line and calls you back when an agent is ready. Saved me like 2 hours of hold time. They have a video showing how it works: https://youtu.be/TbC8dZQWYNQ Definitely worth doing a final check that everything is properly closed out, especially if you're in the adoption process where documentation is so important.

you know there may be loan forgiveness coming right??? shoulda waited maybe??? biden was talking about canceling like $10k for everybody, coulda saved some of that settlement money

Congrats on being debt free!!! Quick question - did you have to pay taxes on your settlement? And will you have to pay taxes on the loan payoff? I know sometimes debt cancellation is considered taxable income, not sure if this is the same situation.