Student Loan Counseling is Required (and Free) for First Time Federal Loan Borrowers
Paying for college is one of life’s biggest expenses. And, borrowing through student or parent loans to cover that cost is one of the biggest financial decisions for your family.
Picture yourself getting bills related to this decision from yourstudentloans@paynow.com for the next five, ten, maybe even twenty years.
Of course, you’re going to have to do some research first, right? Financial aid for college is complicated.
Federal loan counseling, or “FAFSA counseling,” is designed to do just that: it’s supposed to get you up to speed on the money you’re borrowing. Sounds nice, but what exactly is federal loan counseling, and is it enough?
What is Federal Loan Counseling?
Federal loan counseling is mandatory for students who have accepted or will be accepting federal loans to pay for school.
The sessions take two forms: entrance and exit counseling.
The entrance session must be completed before a student accepts loan money—but not before they have applied for it. So the entrance session happens after you’ve applied for federal loans but before you’ve started school.
The exit counseling session needs to be completed before a student graduates or withdraws from school. The idea behind the exit session is to make sure you are clear on what you will need to do to pay back your loans.
There’s no way around completing these sessions: if you don’t attend the entrance session, then the government won’t give you your loans and the school won’t get paid. If you don’t attend your exit session, then the university might do something like withhold your transcript. They are required to make sure students attend the session, so they’ll do whatever it takes to compel you to complete it.
Federal loan counseling only applies to federalloans. More specifically, this means that you will need to complete the counseling requirement if you borrowed a Direct Subsidized or Direct Unsubsidized Loan. However, you will only need to complete counseling once per session type (one entrance, one exit). You don’t need to do it every time you take out a loan—even if you take out more than one type of federal loan.
What about Parent Plus loans? Do parents who are taking out federal loans on their child’s behalf have to attend the session? Generally no, though in some cases Plus counseling is made mandatory for parents with an adverse credit history. How about graduate students taking out Graduate Plus Loans? Yes, grad students must complete the counseling even if you have already completed loan counseling sessions as an undergrad.
Private loan borrowers don’t need to attend the sessions, though some private loan lenders have their own counseling sessions. Be in touch with your lenders about their requirements.
Importantly, sometimes people confuse federal loan counseling with private loan counseling. These are very different things, however. Federal loan counseling is required by the government and is made up of two short workshops that provide a generalized overview of federal loans. They are free and mandatory. Private loan counseling generally costs money and provides more thorough, personalized, and often ongoing advice about how to manage your finances.
How is it Actually Done? The Practicalities of Federal Loan Counseling
Federal loan sessions are short: they generally take about 20-40 minutes. They can be done online, though some schools require that you do them in person.
The process is pretty straightforward, and the format is the same for both entrance and exit counseling. You’ll need some basic information to log in (things like the info from your FAFSA account, your school’s name, your financial aid offer, and a breakdown of your school’s expenses). From there, you’ll read a few slides and answer some questions. Some of the slides are interactive and include short videos.
In terms of the content covered, the entrance counseling sessions provide background to help you understand how much your education will cost, what federal loans entail, and how to prepare for repayment. The exit counseling session covers roughly the same material, but it emphasizes repayment and choice of repayment strategy. Both sessions provide some basic budgeting and personal finance tips.
Is Counseling the same at every University?
Each school determines their own process for student loan counseling, such as whether it will be online or in-person, as well as whether to use the federal studentaid.gov tool or another resource provided by the school.
Some financial aid departments provide extensive workshops on student loans, as well as personal finance in general. Other schools offer much less support.
For example, Northeastern University in Boston has a particularly active student financial services department—and they even host a personal finance idea incubator for students to propose topics for the department to address. Others, like George Washington, Virginia State University, Duke, Berkeley, and Texas A&M’s Money Education Center provide instructional materials and ongoing series that track a student’s changing needs as they advance through their degree program.
Be in touch with the financial aid department at your university or prospective universities to learn more about the services they offer. It’s worth taking a look at the programs before choosing a college.
Tips for Getting the Most out of FAFSA Loan Counseling
So, you know if you’re in or out, and you know what loan counseling will entail. But how can you get the most out of it?
Don’t blow it off. Financial aid counseling provides a valuable chance to get clear on your loans and responsibilities. The sessions have come a long way, and it seems that the government has made efforts to improve them.
It’s a good idea to complete the entrance counseling before you get to campus. Not only do you want to give yourself enough time to carefully digest the material in case you would like to follow up on something or ask a question, but you want to make sure your funds will be released in time to pay the tuition bill.
Once on campus, make regular trips to the financial aid office. It’s worth getting to know the financial aid counselors, they are a great source of knowledge and insight, can answer your questions and put you on the right track.
Final Thought
Mandatory federal loan counseling is useful and a good way to ensure at least a minimum exposure to the subject so that students and parents are not totally in the dark about college related loans.
Ultimately, no major financial decision like this should be handled based on a twenty-minute online review session—even if it has great infographics and a quiz at the end.
Jumpstart the learning process and get smarter about loans before you even apply for one. The federal government’s guides (pdf versions) for both entrance and exit counseling are readily available online and can be viewed at any time in your college planning journey.
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