If you receive a federal student loan, whether Direct Loan, Stafford Loan, or Perkins Loan, you will have to complete both Entrance and Exit Counseling. These are federal requirements mandated by the Department of Education. Why?
First of all, Entrance Counseling is a requirement for all students who are considered New Borrowers. This includes students who are borrowing a federal student loan for the first time and students who have paid off all prior federal student loan debt but are now borrowing again.
The purpose of Entrance Counseling is to provide you with the following:
- explanation of the Master Promissory Note
- explain loan indebtedness and the importance of repaying your loan to avoid default, even if you don't have an income
- explain the consequences of defaulting on your loans
- offer samples of monthly repayment schedules based on different loan indebtedness
Wouldn't you want to know this information? All of this is for your benefit, so you know what your getting yourself into with borrowing. Schools can process a student loan for New Borrowers, but loan funds cannot be disbursed to the student until the Entrance Counseling is completed. Although some schools provide on-site group counseling, most schools have online Entrance Counseling for students to complete and transmit a confirmation to the school. This will most likely be the case for distance learning colleges. You only have to do this one time as a New Borrower. If you drop out of school and return (without repaying 100% of your federal loans), or you transfer schools, you do not have to do this again.
Exit Counseling will be performed when you graduate or drop below half-time enrollment. Exit Counseling must include:
- An average monthly repayment amount based on your indebtedness or an average of student indebtedness at your school
- a review of different repayment options (extended repayment, graduated repayment, etc)
- conditions under which a student can request a deferment or forbearance
- requirement to update borrower information for future contact
- provide information for students to monitor loans on the National Student Loan Data System (NSLDS)
Again, as a distance learning student, your school will most likely provide Exit Counseling online. I often get questions from students who are graduating with their bachelor's degree but returning as a master's student and have received an Exit Counseling notice. The same applies to those students who may have dropped below half-time or completely for a term but are returning. Do they still have to do the Exit Counseling? If this applies to you, my reply is that you can contact the school and notify them of your plans to reenroll, but I advise you to complete the Exit Counseling for your own benefit. Keep in mind that if you do the Exit Counseling under these terms, you will receive another notice when you graduate for the first or second time. In the words of Nike--Just Do It!
As I said before, even though these are annoying steps, this is for your benefit. I hear all too many times of students who are seniors in college, getting ready to graduate, and they have no idea of how much they have borrowed. Then they're shocked to find out. One other note, Entrance and Exit Counseling does not apply to private alternative loans---although that may change in the future.
As I write this, I realize there's additional explanation I can provide on some of these actions, such as deferment and forbearance. I've made a note to discuss these topics in future posts.