What Is Exit Loan Counseling and What to Expect
Understand federal student loan exit counseling. Learn how to prepare for repayment, manage your debt, and fulfill this important requirement.
Exit loan counseling is a mandatory session that prepares students with federal student loans for their repayment obligations. It ensures borrowers understand their loan terms and responsibilities as they transition from academic life to repayment. This counseling serves as a foundational step in managing federal student debt effectively.
Understanding Exit Loan Counseling
Exit loan counseling is a required session for students who have borrowed federal student loans. Its purpose is to help borrowers understand their financial commitments and prepare for the repayment process that begins after their academic period concludes. This counseling is typically required for students who are graduating, withdrawing from school, or dropping below half-time enrollment status.
The timing for completing this counseling usually aligns with these changes in enrollment. Students are generally required to complete it shortly before they cease to be enrolled on at least a half-time basis. This session helps ensure that borrowers are informed about what their federal student loan payments will entail and can develop a suitable repayment strategy for their future.
Key Information Covered During Counseling
The counseling session provides detailed information about a borrower’s federal student loans, including types like Direct Subsidized, Direct Unsubsidized, or PLUS Loans. It also clarifies the interest rates, the total amount borrowed, and the overall debt. The counseling also focuses on the various repayment options available for federal student loans.
Borrowers learn about standard repayment plans, which typically involve fixed monthly payments for up to ten years, and extended repayment plans, which can stretch payments over a longer term of up to 25 years for those with higher loan balances. Income-driven repayment (IDR) plans are also explained, which adjust monthly payments based on income and family size. These include:
- Income-Based Repayment (IBR)
- Pay As You Earn (PAYE)
- Income-Contingent Repayment (ICR)
- Saving on a Valuable Education (SAVE)
Consolidation options, which allow borrowers to combine multiple federal loans into a single Direct Consolidation Loan, are also discussed to simplify repayment.
The grace period, the period after leaving school before repayment begins, is defined, typically lasting six months for most federal student loans. During this time, interest may accrue on unsubsidized loans, potentially increasing the total amount owed. Borrower rights and responsibilities are also covered, including deferment and forbearance, which allow for temporary postponement of payments, and potential loan forgiveness programs.
Consequences of defaulting on federal student loans are highlighted, such as damage to credit, wage garnishment, and loss of eligibility for further federal aid. Finally, the counseling provides details on how to identify and contact loan servicers, the entities responsible for collecting and tracking loan payments.
Completing Your Exit Loan Counseling
To fulfill the exit loan counseling requirement, borrowers typically access the counseling module online through StudentAid.gov. Some educational institutions may also offer in-person sessions or specific online portals, so it is advisable to check with the school’s financial aid office. The online counseling process usually involves reviewing various sections of information, watching educational videos, and completing interactive quizzes to confirm understanding.
Borrowers will need their Federal Student Aid (FSA) ID to log in and may be asked to provide updated contact information, including addresses for next of kin and references. The counseling session generally takes about 20 to 30 minutes to complete in a single sitting, as it cannot typically be saved and resumed later. Upon successful completion, the system provides confirmation, and the information is then sent to loan servicers, ensuring they have the necessary details for the upcoming repayment period. After counseling, the grace period for the loans will commence, followed by the start of repayment.