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What Is Student Loan Counseling?
If you’ve applied for federal student loans, then you’ve probably at least heard people talking about student loan counseling, or gotten notifications from your student loan provider that you must complete it by a certain deadline. Student loan counseling is a presentation provided through the Department of Education’s website to prepare students for the commitment that they are about to undertake when they take out student loans. It informs students or parents about the types of student loans that exist, how interest rates work, and the borrower’s responsibility to repay the loan using a plan that works for them. Essentially, the goal of student loan counseling is to tell students who probably haven’t had a whole lot of experience taking on and repaying debt everything that they need to know about student loans and how to repay them.
When Is Student Loan Counseling Required?
Student loan counseling is required at two points in time during your college career:
- Before you receive your first student loan of a certain type. For undergraduates these student loan types are Direct Subsidized and Direct Unsubsidized Loans. Graduate or professional students need to go to student loan counseling when receiving their first Direct PLUS Loan.
- Whenever you have a student loan balance that exceeds zero and you are terminating your student loan repayment grace period. This means that you need to do student loan exit counseling if you are going to drop below half-time enrollment at your school, you are going to leave school altogether without completing your degree, or you are going to graduate.
What Is the Point of Student Loan Counseling?
Many students who are on a traditional path toward completing their education are at a young age and do not have much experience taking on debt, managing it, and repaying loans over time. The Department of Education requires student loan counseling in certain situations in order to make sure that people who take out student loans in order to pay for their education fully understand the responsibilities associated with taking on debt and the consequences of not paying student loans when they are due. Being fully informed about your student loans can also help you avoid student loan scams.
Student Loan Entrance Counseling
Recall that student loan entrance counseling is required when you take out your first Direct Subsidized or Direct Unsubsidized Loan (in the case of undergraduates) or when you take out
your first Direct PLUS Loan (in the case of graduate/professional students).
FAFSA Entrance Counseling Interview
Your student loan entrance counseling will include:
- A student loan calculator to help you estimate the loan balance you will be expected to repay.
- A reminder that student loans are an option of last resort when it comes to paying for college. They should only be used after you have used all available grants and scholarships and only in the minimum amounts that you need to pay tuition and living expenses.
- Types of student loans, including student loan limits, interest rates, associated fees, and other requirements.
- A calculator to help you estimate your yearly spending and a reminder to take out student loans only to an amount that will fulfill your spending requirements, and no exceed them.
- A student loan repayment calculator which will help you estimate your monthly payments on your student loans and compare different student loan repayment plans.
- Advice on student loan default, including what it is and how to avoid it.
- A reminder to consider your student loan repayments in the context of other expenses that you will take on after you have left college and started your career, including: income taxes and credit card bills.
Student Loan Exit Counseling
While student loan entrance counseling provides students with a general overview of the concepts and terms related to student as well as advice to consider when taking out student loans, student loan exit counseling is focused on making sure that students understand the responsibilities that they will take on when they drop below half-time enrollment, leave school, or graduate.
FAFSA Exit Counseling Interview
Student loan exit counseling will present a lot of the same information that you were exposed to in your entrance counseling. However, it will focus on:
- Options to avoid student loan default, including student loan forgiveness.
- Unique repayment plans that can help you make your student loan payments without overburdening yourself financially, including income-driven repayment plans.
- At the end of your student loan exit counseling, you will be required to provide information on yourself, including your address, contact information, and employer information, as well as information on your closest living relative and two additional references. You will also be asked to select a repayment plan that you believe would best fit your student loan repayment goals.
Remember that student loan counseling exists for your benefit. In requiring it for students, the Department of Education is not trying to distract you or burden you with unnecessary information. The information that you will be exposed to in student loan entrance and exit counseling is critical for understanding the responsibilities associated with student loans and forming a plan to repay them.
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