Entrance Counseling For Student Loans [All you need to know]

For those student loan borrowers who are borrowing federal loans for the first time, it is advised to go for an entrance counseling. Learn more about entrance counseling, the modules, the five topics covered during the counseling and much more. Is it worth your time? Lets find out.

Updated by Chandni Agarwal on 24th August 2020

Student loans are a great way to tackle the high rise in tuition and other expenses to get a degree. For those student loan borrowers who are getting federal student loans, like Direct Subsidized or Unsubsidized Loans for the first time should take up entrance counseling. This should be done before or at the date when the first loan is disbursed. 

Entrance Counseling is also considered as a must for the first time Grad Plus loan borrowers. 

Table of contents

What is entrance counseling for federal student loans

To become eligible for the federal student loan, you need to complete their entrance counseling as entrance counseling is compulsory for those students who are applying for the federal loans for the first time.

If previously you had applied for any direct subsidized or direct unsubsidized federal loans, you wouldn’t need to complete the entrance counseling session again for a federal loan.

Why is entrance counseling compulsory

Entrance counseling is compulsory because if you hadn’t taken any loan previously or it’s your first time when you are applying for the loan. So, in the entrance counseling, you are guided thoroughly about the federal loan. It’s benefits, terms and conditions are explained in detail.

  • Understand the loan process for a Direct loan and what it says

  • How you can manage education expenses and other spendings

  • How defaulting can be avoided on the student loans

  • Make finances a property

  • How a repayment schedule should be planned

Students are given a clear understanding of how a student loan works, their rights and responsibilities, and after a few years of how their loans will look, how they can manage their finances in the best way, and meet payment deadlines. All information is provided by entrance counseling.

Entrance Counseling Modules

The following are some modules that will help you understand entrance counseling more clearly.

First Module

In the first module, you will understand how your loan behaves after a while and how your accumulated interest will increase your debt. Details of multiple loans and your personal information are required to be filled in. Details about the types of federal loans available are also included in this module.

Second Module

The second module covers interactive tools that will tell you the estimated expenses you can have during the course of your study. In this way, you will have a good idea of whether you have sufficient funds to pursue your course. This module also tells you about the benefits you will have if you start paying your interest during the grace period or period of forbearance.

Third Module

This module covers all the information about how your salary will affect your monthly payments, the available repayment option, and when and how you can enter repayment.

Fourth Module

In this module, you will know about the available options to protect your loan from defaulting, which can prevent you from being a defaulter. These include- loan forgiveness, deferment, resolution of disputes with your loan servicer, discharge or loan cancellation, and consolidation of loans.

Last Module

The main aim of this section is to provide and educate you with all the information and knowledge about the student loan. It will help you pay off your loan faster, save money, and lead a financially stable life.

It helps to create savings accounts and maintain emergency funds, minimizing or paying off your credit card debt by budgeting your income, spending wisely, considering credits, tax deductions, and other aspects before spending on your paycheck and maintaining a good credit score.

After the complete session, you will have all the information you entered into the tool, which will provide you a visual representation of your loan status, repayment schedule, and how it will look in a few years under various conditions. It will help keep track of your goal and make sure you pay off your loans, and with a good credit score, you can build a secure financial future.

Entrance Counseling for federal student loans

Before receiving any loan, the Entrance Counseling makes sure that the borrower knows about the terms and conditions of the loan, and their role and responsibilities. Not only for Direct Subsidized or Unsubsidized but Grad PLUS loan borrowers who have never borrowed any loan before also require entrance counseling.

The school conducts loan Entrance Counseling in person or written form. The borrower must sign and return to the school, online or through interactive electronic means with borrowers acknowledging receipts of materials. Available in StudentLoans.Org, interactive automated tools include the U.S Departments of Education’s online entrance counseling tools.

The following entrance counseling must be there, no matter how the school provides entrance counseling:

a) Borrowers Rights and Responsibilities

The importance of repayment and the consequences for failing to repay a federal student loan will be discussed by entrance counseling.

Negative credit score, garnishment of wages, offset of federal and income, and state income tax refunds, offset for Social Security benefits payment, collection charges of up to 20% of payments on the loans. Ineligibility for FHA and VA mortgages and other debt collection(including possible litigation) these all things happen while there is defaulting on your federal student loan. 

It’s challenging for a borrower to get good credit, auto loans, and mortgages if he/she has bad credits, which are from the default. The ability of the borrower to get a job or rent an apartment is also affected.

The use of Master Promissory Note (MPN) is also discussed by entrance counseling. When the loan is disbursed or earlier, the borrower can receive a copy of the MPN.

The entrance counseling also discusses the maximum eligibility period to receive a Direct Subsidized Loan. 

In the case of borrowers withdraws, graduates, and drop below the half time enrollment, they are required to go exit counseling. The counseling will review:

  1. The school definition of half time enrollment- during regular terms and summer periods, and the consequences of not maintaining half time enrollment

  2. If the borrower withdraws before completing the program of study, then it is essential to contact the appropriate school offices

When the borrower does not pay interest, how interest is accrued and capitalized, will be discussed by entrance counseling. Students still enrolled in schools have the option of paying interest if they are Direct Unsubsidized loans and PLUS Loans borrowers.

They will provide a comparison between Direct Unsubsidized loans and Grad PLUS loans for Grad PLUS loan borrowers. The maximum interest rates on these loans, the period when interest accrued on these loans, and when the loan will enter repayment will be reviewed in this comparison.

In case the borrower changes name(e.g., due to marriage), address or telephone number must be notified to the lender. If their employer, employer’s address, or telephone number changes, that also should be announced to the lender. The lender should also be notified by the borrower if there is any change in the borrower’s status, which may affect the loan, such as, if a borrower gets a job while receiving an unemployment deferment.

The borrowers will receive a statement before any repayment begins. It has a list of all their federal student loans, including the interest fees, rates, the balance owed, and a repayment schedule.

The lender should provide all the documentation of the loan’s paid status, once the loan is fully paid. The borrower should keep all the documentation carefully, in case any proof is needed that the loan has been paid off.

b) Available Repayment Plans

All the repayment options will be discussed by entrance counseling. The monthly repayment amount, based on the range of student’s indebtedness is the example by advice. This example will depend upon the type of loan borrower has obtained. 

 The counseling will also review other options relating to repaying of the loans, includes:

  1. If the borrower has any financial difficulty or meets any further requirements, they can opt for deferment and forbearance

  2. There is no prepayment penalty or fees if a borrower wants to prepay their loans in full or half

c) Tip on Budgets and Managing College Costs

To teach borrowers the basic financial concepts, like how to create a budget and how to save money, many schools use entrance counseling as an opportunity.

The entrance counseling will also discuss the impact of accepting the loans on the student’s eligibility for other forms of student financial aid. 

Other Available Resources:

Based on the other sources of information, the entrance counseling will provide information, including 

  1. Individuals who can answer questions about the borrower’s rights and responsibilities or loan terms and conditions, their names and contact information are required

  2. Information about the National Student Loan Data System (NSLDS) and how the borrower can access their records

The federal student loan borrower can contact the college financial aid administrator from the school from which they borrow the loan if they have any questions regarding the terms, conditions, rights, and responsibilities on their loans.

Five topics covered by student loan counseling

Within half an hour of counseling, it is difficult to understand everything at one time. The following points will help you understand the entrance counseling in a better way:

1) Understanding your loans

This section will allow you to enter your individual loan information. You can enter all of your loans if you have multiple at the starting of your college. It allows you to see how much loan grows over time.

When it comes to your current loans and other financing options, you may also review basic terms and conditions, Like:

  • How your loan will grow over time

  • Before loans how and why you can seek gift aid

  • Types of federal loans and their maximum amount available

2) Managing your expenses

An interactive budgeting tool is the main highlight of this section that prepares you for on-campus expenses. The average cost specific to your school can also be pulled by it.

In order to see if you have enough money to pay for one year of school, you have to check Financial aid, income and expenses personalized for your situation.

The website’s calculator allows you to estimate potential savings. You will also be encouraged to make-in school payments on your loans.

3) Planning to repay

StudentsLoans.Org help you find the right career and put you in the pace. To find the projected annual income of your dream job you can visit the Departments of Labour’s CareerOneStop.

 It will help you understand how a salary, or even a placeholder one, will affect

  • Your future monthly loan repayment

  • Your repayment plan options

  • When you should enter repayment

4) Avoiding default

Given that 11.2% of student loan borrower is delinquent on their loans, here are a few steps to follow to not fall into that bracket and in a worst-case scenario default on your loans.

  • Deferment and forbearance

  • Loan forgiveness

  • Loan cancellation and discharge

  • Resolving disputes with your servicer

  • Loan consolidation 

5) Making Finance a priority

It is as broad as its name says. Every aspect of your financial future is covered by it like how you can pay off your loan faster with an idea of healthy spending and saving habits.

  • Open a saving account and keep some emergency fund

  • Pay off your credit card debt and create a budget wisely

  • Build, maintain and protect your credit score

  • Withhold from your paychecks and consider tax deductions, credits.

Is entrance loan counseling worth your time?

As we know entrance counseling has many benefits of its own. Without any penalty, you can cancel your loan or a part of it, once you complete the counseling and realize that student loan is not right for you.

The counseling makes sure you know each and every detail of student loan and confirms that you know your responsibilities as a borrower.