Financial Face-Off: Your student loans are canceled. Should you use your ‘extra’ money to pay off other debt or invest in the stock market?

by | Sep 29, 2022 | Stock Market

Hello and welcome to Financial Face-off, a MarketWatch column where we help you weigh financial decisions. Our columnist will give her verdict. Tell us whether you think she’s right in the comments. And please share your suggestions for future Financial Face-off columns. The face-off The Biden administration’s much-debated student-loan cancellation plan is expected to launch soon, with online applications expected to roll out in early October. Individual borrowers who make less than $125,000 a year (or $250,000 in household income) will have up to $10,000 in federal student-loan debt canceled; eligible Pell Grant recipients will get another $10,000 forgiven. 

With borrowers receiving some financial breathing room, what should they do with the “extra” money that will be in their monthly budgets: Pay off other debts or invest in the stock market?Why it matters Student-loan debt is a heavy burden for many Americans. Some 45 million people collectively owe $1.6 trillion in federal loans, the White House says. The average monthly payment is $460, according to the Education Data Initiative.  This debt has changed the course of some borrowers’ lives, forcing them to put off goals such as buying a house, getting married or having children.  Student-loan debt has staying power: It takes the average borrower 20 years to pay off their loans. The verdict Invest it — even though the Dow Jones Industrial Average
and S&P 500 Index
have been on a downward slide this year.My reasons If you’re a student-loan borrower, you may feel like you’re just scraping by. You may have been taking advantage of the student-loan payment pause to pay basic expenses. But now that some student-loan relief will be permanent, you have the opportunity to be intentional about what you’re doi …

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