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20 million Americans are about to be student debt free — here are the 3 money moves they should make right now

It's important to examine your financial priorities as they shift beyond repaying student debt.

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Source: Getty Images

President Joe Biden's announcement regarding widespread student loan forgiveness freed an estimated 20 million borrowers from student loan debt, allowing borrowers to breathe a sigh of relief and begin thinking about their other financial goals.

While political rhetoric has certainly picked up following the decision, there's still reason to rejoice for the millions of Americans who can finally move forward, focus on other financial priorities and start making major life decisions such as whether or not to get married, launch a business or start a family.

As the celebrating continues, it's also important to create a plan and take advantage of this sudden windfall. Select spoke with Lauren Anastasio, director of financial advice and certified financial planner at Stash, a popular investing app, about the next steps that would be best for those who are now without student loan debt.

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What debt-free student loan borrowers should do next

Wednesday's announcement comes on the heels of nearly 2.5 years of a federal student loan repayment pause and allows for one final extension through Dec. 31, 2022. Those who qualify within certain income limits and have less than $10,000 in student debt — or less than $20,000 for Pell Grant recipients — will now be free of their federal student loans.

According to Anastasio, there is still one more important step needed to make it official: Make sure you get it in writing that your student loan debt has been paid in full.

"You should receive a congratulatory letter from your servicer confirming that your loans have been paid off. Save this letter. You may receive it electronically or be able to access it through the servicer's website, but you will want to have a copy for your records just in case," Anastasio says. "After 60-90 days, you'll also want to consult your credit report to see that all applicable loans have been updated to reflect that they have been paid and closed."

As you wait for your official documents to come in, it's a good time to start coming up with a plan for that additional money you would otherwise have been putting toward your loans.

"Take the time to think about what you want to make happen for yourself so you don't lose track of the money and wind up spending it on things that aren't meaningful to you," said Anastasio. For example, don't run out and lease a new car if you already have a vehicle that meets your needs. You'll just be signing up for another form of debt when taking out a car loan or leasing a vehicle — and cars are considered a an asset that loses value over time.

Here are three important things you should focus on doing next as your financial priorities shift beyond student debt.

Replenish your emergency fund

Anastasio recommends filling your emergency fund to the point where you'd have enough to cover three to six months worth of living expenses. This is a great first step since it helps to provide a financial safety net in case something unexpected arises, such as a job loss, costly car repair or housing fix.

Consider stashing your emergency dollars away in a high-yield savings account so your balance can earn more interest over time than it would in a standard savings account. Some of our favorite high-yield savings accounts are the LendingClub High-Yield Savings Account, *American Express® High Yield Savings Account and the Marcus by Goldman Sachs High Yield Online Savings.

LendingClub High-Yield Savings

LendingClub Bank, N.A., Member FDIC
  • Annual Percentage Yield (APY)

    5.00%

  • Minimum balance

    No minimum balance requirement after $100.00 to open the account

  • Monthly fee

    None

  • Maximum transactions

    None

  • Excessive transactions fee

    None

  • Overdraft fees

    N/A

  • Offer checking account?

    Yes

  • Offer ATM card?

    Yes

Terms apply.

American Express® High Yield Savings Account

American Express National Bank is a Member FDIC.
  • Annual Percentage Yield (APY)

    4.35% APY as of 12/14/2023

  • Minimum balance

    Min balance to open = $0

  • Monthly fee

    $0

  • Maximum transactions

    No limits

  • Excessive transactions fee

    None

  • Overdraft fee

    None

  • Offer checking account?

    No

  • Offer ATM card?

    No

  • Terms apply.

  • American Express National Bank is a Member FDIC.

Marcus by Goldman Sachs High Yield Online Savings

Goldman Sachs Bank USA is a Member FDIC.
  • Annual Percentage Yield (APY)

    4.50% APY

  • Minimum balance

    None

  • Monthly fee

    None

  • Maximum transactions

    At this time, there is no limit to the number of withdrawals or transfers you can make from your online savings account

  • Excessive transactions fee

    None

  • Overdraft fee

    None

  • Offer checking account?

    No

  • Offer ATM card?

    No

Terms apply.

Pay off high-interest debts

Credit card debt has been on the rise as inflation continues to push consumer budgets even further. Now that your student loan debt is forgiven, you can prioritize paying down other high-interest debt instead.

If you happen to have multiple high-interest debts, consider consolidating them into one concise payment by taking out a personal loan through an issuer such as PenFed or SoFi, which Select ranked among the best options for personal loans.

PenFed Personal Loans

  • Annual Percentage Rate (APR)

    7.99% to 17.99% APR

  • Loan purpose

    Debt consolidation, home improvement, medical expenses, auto financing and more

  • Loan amounts

    $600 to $50,000

  • Terms

    1 to 5 years

  • Credit needed

    Good/Excellent

  • Origination fee

    None

  • Early payoff penalty

    None

  • Late fee

    $29

SoFi Personal Loans

  • Annual Percentage Rate (APR)

    8.99% - 29.49% when you sign up for autopay

  • Loan purpose

    Debt consolidation/refinancing, home improvement, relocation assistance or medical expenses

  • Loan amounts

    $5,000 to $100,000

  • Terms

    24 to 84 months

  • Credit needed

    Good to excellent

  • Origination fee

    No fees required

  • Early payoff penalty

    None

  • Late fee

    None

Terms apply.

If you want to focus on paying back your credit card debt with your newly freed up cash, consider transferring your balance to a card with an introductory 0% APR period which can be a good way to save even more money while paying back your balance. After you've opened the new card and transferred your balance, you won't be charged any interest for the introductory period, which can be as long as 21 months.

Select ranked the Wells Fargo Reflect® Card and the U.S. Bank Visa® Platinum Card as some of the best credit cards with intro 0% APR periods.

Wells Fargo Reflect® Card

  • Rewards

    None

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    0% intro APR for 21 months from account opening on purchases and qualifying balance transfers.

  • Regular APR

    18.24%, 24.74%, or 29.99% Variable APR on purchases and balance transfers

  • Balance transfer fee

    5%, min: $5

  • Foreign transaction fee

    3%

  • Credit needed

    Excellent/Good

See rates and fees. Terms apply.

U.S. Bank Visa® Platinum Card

Information about the U.S. Bank Visa® Platinum Card has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
  • Rewards

    None

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    0% for the first 18 billing cycles on balance transfers and purchases

  • Regular APR

    18.74% - 29.74% (Variable)

  • Balance transfer fee

    An introductory fee of either 3% of the amount of each transfer or $5 minimum, whichever is greater, for balances transferred within 60 days of account opening. After that, either 5% of the amount of each transfer or $5 minimum, whichever is greater

  • Foreign transaction fee

    3%

  • Credit needed

    Excellent/Good

See rates and fees. Terms apply.

Start investing for your retirement

If you're one of the many Americans that haven't been able to invest for retirement because of student loan debt, start by taking the same amount of money you would have been paying toward your loans and allow those dollars to work for you and your financial future instead.

For example, let's say your monthly student loan payment was $400. If you take that same $400 a month, open a Roth IRA and invest in an S&P 500 index fund over 20 years, assuming a moderate 8% return, you'll end up earning more than $219,000 in tax-free money for retirement. If you bump that up to $500 a month over 30 years — which gives the power of compound interest more time to go to work — you'll end up earning a whopping $679,000 for your retirement.

It's easy to open a Roth IRA through a low-cost brokerage or robo-advisor, usually within minutes, and get started on investment journey today. Here's a look at some of our favorites:

Wealthfront

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. $500 minimum deposit for investment accounts

  • Fees

    Fees may vary depending on the investment vehicle selected. Zero account, transfer, trading or commission fees (fund ratios may apply). Wealthfront annual management advisory fee is 0.25% of your account balance

  • Bonus

    None

  • Investment vehicles

  • Investment options

    Stocks, bonds, ETFs and cash. Additional asset classes to your portfolio include real estate, natural resources and dividend stocks

  • Educational resources

    Offers free financial planning for college planning, retirement and homebuying

Terms apply.

Charles Schwab

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One® Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit

  • Fees

    Fees may vary depending on the investment vehicle selected. Schwab One® Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract

  • Bonus

    None

  • Investment vehicles

    Robo-advisor: Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One® Brokerage Account, Brokerage Account + Specialized Platforms and Support for Trading, Schwab Global Account™ and Schwab Organization Account

  • Investment options

    Stocks, bonds, mutual funds, CDs and ETFs

  • Educational resources

    Extensive retirement planning tools

Terms apply.

Betterment

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. For example, Betterment doesn't require clients to maintain a minimum investment account balance, but there is a ACH deposit minimum of $10. Premium Investing requires a $100,000 minimum balance.

  • Fees

    Fees may vary depending on the investment vehicle selected, account balances, etc. Click here for details.

  • Investment vehicles

  • Investment options

    Stocks, bonds, ETFs and cash

  • Educational resources

    Betterment offers retirement and other education materials

Terms apply. Does not apply to crypto asset portfolios.

Bottom line

While this week's student loan forgiveness announcement is going to help millions of borrowers get back on their feet, it's crucial to keep that financial momentum going forward.

"If you simply remove the line item from your budget, the money will likely be spent on other things," Anastasio says. "Instead of removing the monthly cost from your budget altogether, consider reallocating it toward a different debt or putting it in savings."

In other words, instead of using that portion of your money to pay off your student loans, you should now be using it to grow your net worth. Your future self will surely thank you for this.

Catch up on Select's in-depth coverage of personal financetech and toolswellness and more, and follow us on FacebookInstagram and Twitter to stay up to date.

*American Express National Bank is a Member FDIC.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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