A Guide to Federal Student Loan Counseling

First-time federal student loan borrowers are required to complete entrance counseling before the government disburses the first payment. On the back end, exit counseling must be completed when a borrower leaves school.

Both types of counseling are mandated by law, emphasizes Delisa Falks, assistant vice president for scholarships and financial aid at Texas A&M University.

“Entrance counseling ensures students understand the terms and conditions of their loan(s) and their rights and responsibilities,” she says. “Students learn through entrance counseling how interest works, their repayment options and how to avoid delinquency and default. As students exit college or if they drop to below half time, exit counseling is to ensure students understand their loan obligations and are prepared for repayment of their loans.”

If you plan to apply for federal student loans to help pay for college as an undergraduate or as a graduate or professional student, there are important things you need to know about entrance and exit counseling, both of which can be done online.

What Is Federal Student Loan Entrance Counseling?

Entrance counseling provides information about types of federal student loans, how interest works, repayment options and how to avoid delinquency and default.

“Loan entrance counseling gives students the opportunity to learn about the responsibilities with budgeting, credit, repayment, as well as pertinent consumer information as a loan borrower,” says Tammy Dee Lane, associate director of admissions and financial aid at Emory University in Georgia.

Counseling on the front end is important and should be taken seriously because students “need to understand the financial obligations of borrowing student loans,” Falks says. “They have rights and responsibilities for loans they borrowed. The entrance counseling model takes about 30 minutes and students should pay attention to all the information presented, so they will be prepared for loan repayment later.”

Students generally will not receive their federal loans without completing entrance counseling first, Falks warns. Delaying the counseling too long could cause a student to receive loan payouts later than hoped or expected, throwing a wrench in financial plans.

The entrance counseling session goes beyond just loan repayment. It introduces students to what their education costs are and helps them build a plan to cover the cost of attendance at their chosen school, Falks explains.

“It will also help students determine what are their sources for paying for college” in addition to student loans, she says. “They will learn about how student loans work, the different types of student loans and on to preparing for repayment and consequences of delinquency and default.”

Remember that you cannot save and leave an incomplete session when doing the counseling online. You must complete it in one sitting.

To start the process of entrance loan counseling, you need a StudentAid.gov account, your school name and a breakdown of your school’s tuition and fees. You also need the financial aid award letter from your school, which should outline any loans, scholarships, grants, expected contributions from you, etc.

Your school may have other entrance counseling requirements. Check with the financial aid office to be sure that the federal online counseling satisfies your school’s entrance counseling requirements.

If your school requires you to complete and return a written entrance counseling document, you can get it by downloading the free Direct Loan Entrance Counseling Guide provided by the U.S. Department of Education. The guide has five sections covering more than 20 topics, from the opening section that provides a basic understanding of the federal student loan system to topics such as budgeting, managing loan disbursements, estimating future earnings and obligations, understanding repayment plans, working with servicers, avoiding default, paying taxes, using credit responsibly and loan forgiveness.

When you finish with entrance counseling, a record of your completion will be sent to your college and you will be able to receive your loan money.

What Is Federal Student Loan Exit Counseling?

Exit counseling is required when you leave school, whether you graduate or withdraw for any reason. It’s also required if you drop below half-time attendance.

Many of the same topics covered in entrance counseling are part of exit counseling because the lender – the federal government – wants to remind you of the seriousness of the financial obligation, experts say.

“Exit counseling will cover repayment options, interest rates, tips for avoiding delinquency and default and the importance of students always keeping their contact information up to date,” Falks notes.

You’ll need access to your StudentAid.gov account and use your school name and updated contact information to log in and do the exit counseling.

It would be unwise to not take exit counseling seriously, experts agree.

“With so many competing demands on your time, it can be tempting to view student loan exit counseling as just one more item on your to-do list and rush through the session as quickly as possible,” Meghan Lustig, director of operations and development for the Education Finance Council, wrote in a Student Loan Ranger blog post in 2020. “But the information it provides can help you to repay your federal student loans, so you should slow down and be sure you absorb it.”

Exit counseling is particularly important for borrowers who are new to loans and credit, as well as first-generation students and others unfamiliar with the processes of getting into college and repaying loans for education, experts say. Exit counseling outlines the various repayment plan options for the different types of federal student loans and details tough consequences for failing to repay.

“Learning how to manage student loan repayment can sometimes feel like speaking a foreign language,” Lustig wrote. “There are so many terms that may feel unfamiliar, especially if a student loan is your first financial product. Overlooking an opportunity to familiarize yourself with the related terminology can lead to confusion and frustration down the road, especially if you wait until you need to troubleshoot a problem.”

As with entrance counseling, your school may have other requirements for student loan exit counseling, so check with the financial aid office. For example, your school may want you to do it manually rather than online, and it can be downloaded and printed out as part of the Education Department’s Direct Loan Exit Counseling Guide.

Like entrance counseling, exit counseling also typically can be completed within a half-hour.

Remember that you’re not alone if you must rely on borrowing to help fund your education. According to the Education Department, cumulative federal student loan debt tops $1.6 trillion and continues to rise, affecting more than 45 million borrowers who are primarily in the middle class. Those numbers don’t include people who have borrowed from other sources, such as banks and state-level organizations.

Experts emphasize several points when applying for student loans: Borrowers should take counseling seriously, be concerned about the consequences of defaulting and never take out a loan with the expectation of forgiveness – despite existing federal student loan forgiveness programs and federal executive or legislative actions that may be taken to cancel such debt.

“Defaulted loans negatively affect credit scores, your overall credit report, home ownership and basically anything that requires good credit,” Lane says. “The concept of or proposed policies on loan forgiveness are just too unstable to rely on not having to pay loans back. Plus, whenever you borrow or extend credit to purchase, you are agreeing to pay back. Ethically, you should always have the intent to pay back when you sign a promissory.”

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