What Is Student Loan Counseling & When Do You Need It?
If you're a first-time borrower, you may not fully understand the dynamics of taking out a student loan. Student loan counseling can advise you about loan options and repayment plans—and you can sometimes get it for free.
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Student loans are a puzzling phenomenon. Odds are you need them to attend college, but the finer points can be a challenge to understand.
Student loan counseling is set up to make sure you understand the terms and conditions of your loans, who services the loan, and how to repay.
This guide will explain your student loan counseling requirements, options, alternatives, and how to complete counseling.
In this guide:
Student loan counseling for federal financial aid
If you apply for financial aid, you will likely be offered federal student loans. You must pay back student loans with interest. To ensure you understand your responsibilities, you may be required to complete various forms of student loan counseling, depending on which loans you borrow.
- Financial aid entrance counseling
- Student loan exit counseling
- PLUS credit counseling
- Financial awareness counseling
Financial aid entrance counseling
- What is it? Financial aid entrance counseling helps you understand everything you need to know about receiving a federal student loan from the U.S. Department of Education.
- Who’s it for? If you have never received a loan under the Federal Family Education Loan (FFEL) program or the Federal Direct Loan program, you’re required to complete entrance counseling.
- When is it required? You must complete entrance counseling before your school makes your first loan disbursement.
How to complete entrance counseling
How to complete your entrance counseling varies by school. Some schools require in-person counseling with a student loan counselor in the financial aid office, while others let you complete your counseling online. Your school’s financial aid office can tell you which is required.
In many cases, you’ll simply be asked to log into the Federal Student Aid website to complete your entrance counseling. It’s an easy process that you can expect to take about 20 to 30 minutes.
Student loan exit counseling
- What is it? Exit counseling gives you all the information you need to repay your federal student loan(s).
- Who’s it for? Student loan exit counseling is required if you receive subsidized, unsubsidized, or PLUS loans under the FFEL program or Direct Loan program.
- When is it required? You’re required to complete exit counseling each time you drop below half-time enrollment, graduate, or leave school.
How to complete exit counseling
Your school’s financial aid office can tell you how to complete your student loan exit counseling. Your school may tell you to go to the Federal Student Aid website to complete your exit counseling, which can take about 30 minutes.
PLUS credit counseling
- What is it? PLUS credit counseling helps you and your parents understand everything about student loan debt so that you can make sense of the requirements and obligations that come with borrowing a PLUS loan.
- Who’s it for? Graduate or professional students who borrow a grad PLUS loan and parents of undergraduate students who borrow a parent PLUS loan are required to complete PLUS credit counseling if they have an adverse credit history.
- When is it required? The Department of Education requires that students or parents complete PLUS credit counseling if they have an adverse credit history. That generally means more than $2,085 in delinquent debt, debt in collection, bankruptcy, foreclosure, default, repossession, wage garnishment, tax lien, or a write-off of federal student loans.
How to complete PLUS credit counseling
A free demo on how to complete PLUS credit counseling is available on the Federal Student Aid website. To complete counseling, you’ll need to provide:
- An FSA ID for both student and parent borrowers.
- Loan information, which you can find through the National Student Loan Data System (NSLDS).
- Adjusted gross income.
- Tax filing status.
- State of residence.
- Size of your family.
- Living expenses, such as whether you rent or own your home, utility costs, what you pay for groceries and insurance, and credit card payments.
Financial awareness counseling
- What is it? Financial awareness counseling helps students and parents better manage their finances and understand student loan obligations.
- Who’s it for? Financial awareness counseling is available for anyone who is repaying or planning to borrow student loans.
- When is it required? Financial awareness counseling is optional. It is best if you are uncertain of your financial obligations and how to repay your student loans.
How to complete financial awareness counseling
To complete financial awareness counseling:
- Log into the Federal Student Aid website using your FSA ID.
- On the left-hand navigation bar, select Complete Counseling.
- Under Type, select Financial Awareness Counseling.
You’ll need:
- Your student account information.
- Your reward letter from the financial aid office of your school.
- Tuition and fees for your school, which you can find on the College Navigator website.
- Income, financial aid, and living expenses.
You must complete the entire counseling process in a single session, which usually takes about 20 to 30 minutes.
Can credit counseling help with student loans?
You can also pay for student loan counseling offered by independent nonprofit counseling agencies.
These services give you the tools and the knowledge to better understand your debt, including both federal and private student loans, and come up with the best way to pay them back. They are designed for borrowers who are struggling with debt.
It’s unfortunate, but student loan assistance scams rip off student loan borrowers every day. Third parties pose as legitimate student loan servicers or counseling services offering free repayment help.
Watch out for these three things that could mean a company is a scam:
- It asks for upfront payments or monthly fees.
- You’re promised immediate loan forgiveness.
- It asks for your FSA ID and password.
If you think you’ve already been scammed, change your FSA ID and password immediately. Contact your loan servicer, credit card company, and bank, and request that payments to the company be stopped.
Finally, file a report of suspicious activity through the Federal Student Aid Feedback System.
Pros & cons of nonprofit student loan counseling
Pros
- Student loan counseling can help you better understand the conditions and particulars of your loans.
- Credit counselors can help you negotiate lower interest rates or a longer repayment period that would reduce your monthly payments.
- Enrolling in a credit counseling program does not directly affect your credit score.
- Nonprofit agencies offer services at little to no charge.
Cons
- In recent years, student loan counseling has seen several scams emerge.
- It requires you to make on-time monthly payments.
- It can be a challenge to stick to the debt payoff plan.
- Fees can add up.
Exhaust free options for student loan guidance first
Before you pay for student loan counseling, exhaust your options for free advice first.
- Our student loan repayment guide can help you understand your repayment options, and show you how to pay off your loans faster, how to pay less each month, and more.
- Our easy-to-use student loan payment calculator lets you see what your monthly payment will be after you leave school based on your loan amount, interest rate, and loan term.
- The National Student Loan Data System (NSLDS) website is a database for student aid set up by the U.S. Department of Education. The database lets you see which company services your federal loans and how to contact it.
- You can get your credit report for free to see all your student debt (and other debts) in one place.
