6 Important Ways to Prepare For Canceling Your Student Loan Debt

The Student Loan Debt Relief Plan was announced on August 24. There will be a cancellation of student loan debt. There are a few things that you should look into if you have student loans and you qualify for this cancellation. There are some risks, and some things to look out for. Here’s a list of how I’m getting ready.

1. Print, download, and save all your student loan information

Make sure you save all your paperwork and make note of the total amount you owe. There's always a risk of human error, or technology error. You never know what could happen.

Maybe another zero gets popped onto your total. Maybe you have $5,000 added to your account mistakenly, or maybe you have a really common name, and something happens with your account that should be applied to somebody else's account.

That’s why you want to always know what you currently owe. Go to your student loan lender's website, download all the information and keep it handy.

2. Go to studentaid.gov and determine which cancellation you qualify for

Do you qualify for 10K or 20K? You qualify for 20K if you received a Pell Grant in college. If you can't remember, you can check on studentaid.gov. Go to your dashboard and you will see your student loans and the amount of Pell Grants that you received.

I would also suggest downloading that information and keeping it in your files. This way you have it handy if you only end up having 10K canceled when you should have had 20K. You can show them the files and prove that you had the Pell Grants and qualify for the 20K.

3. Sign up for the email notifications

Sign up for the email notifications that the government puts on this Debt Relief Plan website. There are some 40 million people who qualify for this cancellation, and on the Student Aid website it said that only about 8 million of those people will automatically receive this cancellation.

This is because the Education Department already has that income data for those 8 million people. The bulk of us are not in that crowd, so we're going to need to apply for this cancellation, so be sure you stay informed.

4. Beware of scams

Scammers will take advantage of everything that's going on. You may get an email, or a text message that may look legit but you have to be cautious. Be suspicious of anything that says you need to pay something. If you get a text with a link, don’t click on it. Don't click on links sent in emails. Once the application is available, just go to the website yourself.

If you get sketchy calls related to student loans, it's probably best to ignore them. Always come back to official government resources, go to studentaid.gov and see what's happening. Check with other resources and make sure what you're doing is legit because a lot of people are going to fall victim to scams over the next few months.

5. Prepare to pay your student loans come January 2023

This only applies to you if you still will have student loan debt remaining after the cancellation. The forbearance and 0% interest are continuing to the end of 2022, but that means you're going to have to start making payments in January 2023 or February 2023, so you’re going to want to be prepared.

If you're one of those people who did not prep for that, or you've been spending your money like crazy, then you have a few months to prepare. Get your spending in check, create a budget, start saving, and create a plan. Make sure you have everything set in place for January or February so that you are on the proper payment plan for your current income.

6. Educate yourself on finances

For so many people, this is going to wipe out their student loan debt and that is a huge opportunity. This can be life-changing. You can start saving for a house, you can start investing, you can start saving for an emergency fund, and you can start a business. There's so much opportunity with this student loan debt cancellation, so start educating yourself and take advantage.

If you are somebody who struggles to understand financial management, try listening to podcasts, reading blog posts, and watching YouTube videos.

I know for some people it's not entertaining, it's not fun to listen to. But once you start learning about it and start understanding more, it helps you to get more interested.

If you are young, you should be thinking about retirement, even if that's 40 or 50 years from now. Start getting educated on how to invest in index funds and how to invest in your Roth IRA. You can start putting money towards your 401K.

Canceling student loan debt

This student loan debt cancellation is to help all of us. Take advantage of this opportunity and educate yourself. Make smart financial decisions going forward.

You can start by getting on top of the six actions I listed here to ensure that you’ve taken care of the most important things to do if you have student loans and you qualify for this cancellation. Feel free to ask questions in the comments.