What Is Entrance Counseling for Student Loans?

Entrance counseling is a mandatory online session for individuals borrowing federal student loans for the first time. It provides a comprehensive overview of loan obligations and educates borrowers on the terms and conditions of their federal student loans. This counseling is a prerequisite for the disbursement of federal student loan funds, ensuring borrowers fully understand the significant financial commitments they are undertaking and helping to reduce the likelihood of loan default.

Understanding Entrance Counseling

First-time federal student loan borrowers must complete entrance counseling. This includes students taking out Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans. Graduate or professional students borrowing Direct PLUS Loans must also complete this counseling, even if they completed it as undergraduates. Parent PLUS Loan borrowers have a separate counseling process tailored to their loan type. This mandatory step ensures borrowers are adequately prepared for the financial commitments they are about to undertake, providing them with essential knowledge. Loan funds cannot be disbursed until this requirement has been officially fulfilled, confirming a borrower’s understanding of their responsibilities and the implications of accepting federal aid.

Key Information Covered

Entrance counseling provides detailed insights into various aspects of federal student loans, beginning with the fundamental differences between loan types. Borrowers learn how interest accrues on Direct Subsidized and Unsubsidized Loans. Subsidized loans generally do not accrue interest while a student is enrolled at least half-time, during the grace period, or during deferment, as the government pays the interest during these times. Unsubsidized loans, conversely, accrue interest from the moment they are disbursed, making borrowers responsible for all accrued interest. The counseling also explains fixed interest rates and loan origination fees, which are percentages deducted from the loan amount before funds are disbursed. These rates and fees vary by loan type and are determined annually by federal law.

A significant portion of the counseling focuses on the various repayment options available to borrowers. This includes standard repayment plans with fixed monthly payments over 10 years. Various income-driven repayment (IDR) plans are also covered, which adjust monthly payments based on income and family size. These plans can extend the repayment period, and any remaining balance may be forgiven after 20 or 25 years. Borrowers learn that payments can fluctuate with income changes and require annual recertification.

The session addresses the serious consequences of loan delinquency and default. Missing payments leads to delinquency, and prolonged delinquency results in default. Default consequences include the entire unpaid balance becoming immediately due, severe damage to credit ratings, and federal agencies withholding tax refunds and federal benefit payments (Treasury offset). Wages may also be garnished without a court order.

Borrower rights and responsibilities are also outlined in detail during the counseling session. Rights include prepaying loans without penalty and accessing options like deferment or forbearance for temporary payment postponement during financial hardship. Responsibilities involve updating contact information and notifying loan servicers of changes in enrollment status. Information on loan consolidation, which combines multiple federal loans into a single new loan, is also provided.

Completing the Counseling Process

Entrance counseling is completed through an online module designed to be user-friendly and informative. It is typically accessed via the official Federal Student Aid (FSA) website, studentaid.gov. Borrowers log in using their Federal Student Aid ID (FSA ID). The online module is structured with various sections covering the required educational content, often incorporating interactive elements and comprehension questions to confirm understanding.

The counseling session usually takes 20 to 30 minutes. Upon successful completion, a confirmation message is provided. A record of the counseling is electronically transmitted to the financial aid office of the borrower’s educational institution, allowing the school to proceed with loan fund disbursement. Borrowers can receive an email confirmation or download a certificate of completion for their personal records. The completion status is typically updated within the federal student aid system within a few business days.