Exit Counseling for Federal Education Loans
Federal law requires students who borrow from the Federal Perkins loan, Federal Stafford loan and Federal Grad PLUS loan programs and/or receive a TEACH Grant to undergo exit counseling when the student graduates, withdraws or drops below half-time enrollment. Exit counseling is required even if the student plans to transfer to another college or university.
Exit counseling helps federal student loan borrowers understand how to repay their loans and reviews deferment and repayment plan options. Exit counseling also discusses borrower rights and responsibilities. Updated student contact information will also be collected at the end of the exit counseling session.
Exit Counseling Requirement
Colleges and universities must provide exit counseling to every federal student loan borrower shortly before he or she graduates, drops below half-time enrollment status or ceases to be enrolled at the school. Exit counseling may be provided in person, by audio-visual presentation, online or through interactive tools. Online exit counseling is available on the StudentLoans.gov web site.
If the borrower drops out without telling the school or fails to complete exit counseling, the school must mail written exit counseling materials to the borrower at his or her last known address, email the materials to the student's home email address or ensure that the student has completed online exit counseling. Schools may fulfill this requirement by mailing or emailing the Exit Counseling Guide for Federal Student Loan Borrowers to the student.
Schools must ensure that someone with expertise in Title IV federal student financial aid programs is available to answer borrower questions after the exit counseling session.
Schools must document, for each borrower, that the borrower received and understood exit counseling.
Topics Discussed during the Exit Counseling Session
The exit counseling session will discuss the seriousness and importance of the federal student loan repayment obligation, including a summary of the consequences of loan default . Borrowers are obligated to repay their federal education loans in full even if the student does not graduate or takes longer than expected to complete the program, is unable to get a job after graduation or is otherwise dissatisfied with the quality of the education and/or other services he or she received from the school.
The exit counseling session will review the terms and conditions of the student's federal loans, including interest rates, grace periods and the date the first payments are due. It will summarize the features of the available repayment plan options, including standard repayment, extended repayment, graduated repayment, income-contingent repayment, income-based repayment and pay-as-you-earn repayment. Exit counseling will provide examples for each repayment plan showing the average estimated monthly loan payments, total interest paid and total payments based either on the student's actual debt burden or the average cumulative debt burden of all borrowers at the school in the same program of study as the borrower. Federal student loan borrowers may change repayment plans at least once a year.
The exit counseling session will explain that the borrower has the right to prepay his or her federal student loans or accelerate the repayment of the loans without penalty. Generally, borrowers who accelerate repayment of the loan with the highest interest rate first will pay off their debt quicker and reduce the total interest paid. To prepay a student loan in full or in part, mail a separate check with the extra payment to the loan servicer a few days after the regular due date. Include a letter that asks the servicer to apply the extra payment as a prepayment to the principal balance of the loan with the highest interest rate. Specify the student loan ID of the loan in the letter and write it on the check. Emphasize that the extra payment should be treated as a prepayment and not an early payment of the next month's student loan bill.
Exit counseling will review debt-management strategies that help a borrower repay his or her loans, such as how to develop a realistic budget.
Exit counseling will discuss the effects of federal student loan consolidation on the borrower's loans, including the total interest and fees, the length of repayment, the monthly payments, and the total payments. It will also discuss the impact of consolidation on various loan benefits, such as grace periods and loan deferment and forbearance options. Federal student loan consolidation may cause a borrower to lose the remainder of the loan grace period. Consolidation of Federal Perkins Loans may cause the borrower to lose subsidized interest benefits and favorable loan forgiveness options on the Federal Perkins Loans.
Exit counseling will provide information about loan forgiveness and cancellation options, including options like public service loan forgiveness that are available to borrowers in the Federal Family Education Loan (FFEL) program who consolidate their loans into the Federal Direct Loan program.
Exit counseling will also provide information about education tax benefits that are available to federal student loan borrowers, including the student loan interest deduction.
The exit counseling session will provide the borrower with information about various resources available to the borrower, including:
- How to access the borrower's records in the National Student Loan Data System (NSLDS). NSLDS may be used to get the current balances on a borrower's federal education loans and the name and contact information for the servicer of the borrower's federal education loans.
- Information about the Federal Student Aid (FSA) Ombudsman at the U.S. Department of Education
- Names and contact information of people the borrower can contact with questions about loan terms and conditions and the borrower's rights and responsibilities
- Contact information for the servicer of the borrower's federal student loans
Borrowers who have questions about their rights and responsibilities and/or the terms and conditions of their loans may also visit the Repay Your Loans section of the U.S. Department of Education web site.
Information Collected during the Exit Counseling Session
Colleges and universities are required to collect the following information during the exit counseling session:
- The borrower's name, address and Social Security number
- The borrower's driver's license number and state of issuance, if applicable
- The borrower's expected permanent address
- The name and address of the borrower's current and/or expected employer
- The name and address of the borrower's next of kin
- The names and addresses of two references for the borrower who live in the U.S.
The school will provide this information to the servicer of the borrower's federal student loans.
Other Recommendations for Borrowers Entering Repayment
Borrowers should get organized by making a checklist of all their loans, including the name, web site, telephone number and other contact information for each lender and servicer, the interest rate and the date the first payment is due. Borrowers should add a note to their calendars two weeks before each loan's due date. The payment is due even if the borrower does not receive a coupon book or loan statement from the lender. Borrowers are responsible for letting the lender know about any address changes.
Borrowers may wish to sign up for auto-debit. Auto-debit directly deducts the monthly loan payments from the borrower's bank account. Not only does this reduce the likelihood that the borrower will be late with a loan payment, but many lenders offer an interest rate reduction to borrowers who make their loan payments through an auto-debit program.