Americans now hold a record $1.73 trillion in student loans combined. For many people, educational loans are the biggest debt burden they’ll ever face, and the prospect of having to pay them off can seem overwhelming.
If your income is modest or your expenses are high, you may not know how you can afford to pay your loans at all or what options exist for reducing or pausing payments. Perhaps your finances have changed over time, and you’re wondering whether your current repayment plan still suits your needs. There’s no one solution to tackling student loan debt — the right plan looks different for each person.
Figuring this out can be hard on your own, but there are counselors that can help. Several different student loan counseling services exist that can help you understand your options and find the repayment strategy that’s right for you. Federal student loan borrowers are required to undergo entrance counseling before borrowing any federal student loans. There are also nonprofits that provide counseling and information on navigating student loans.
What Not to Do If You Need Student Loan Help
If you have questions about student loans, ignoring your uncertainty isn’t the answer, especially if that means falling behind on student loan payments. At any given time, roughly 15% of student loans are in default.
Defaulting has serious consequences, since it is a major hit to your credit score, and student loans can’t be discharged in bankruptcy. Instead, regardless of your current situation, a solid plan can help you tackle your student loans in a way that fits your circumstances and goals.
Recommended: Defaulting on Student Loans: What You Should Know
When you’re ready to get help, be careful where you turn. There are shady companies out there offering advice and too-good-to-be-true solutions for eliminating your debt. Some of these student loan scams offer to discharge your loans or warn that you need to take advantage of a forgiveness program before they’re discontinued.
Many charge for services that are free if you have federal student loans and take action yourself. A little homework can prevent getting caught up in a scam. Below are some legitimate options for getting student loan counseling.
What is Student Loan Entrance Counseling?
Student loan entrance counseling is a mandatory exercise designed to inform federal loan recipients of their loan terms and responsibilities as borrowers. More specifically, the session covers student loan interest rates, repayment options, and the repercussions for default.
The Department of Education’s online module includes five sections with a range of loan-specific and financial topics, while schools have some discretion in how they deliver counseling sessions.
This requirement has been in place since the Federal Direct Loan program was created in 1992 with the goal of reducing delinquency.
When Do You Need to Go Through Student Loan Entrance Counseling?
If you’re borrowing federal student loans for the first time, student loan entrance counseling is a prerequisite for accessing funds. Therefore, it’s important to complete the session before the first loan disbursement.
Borrowers with direct subsidized and unsubsidized loans, as well as graduate students taking out direct PLUS loans, are required to participate in student loan entrance counseling. Students may be obligated to take additional entrance counseling at their chosen school too, so be sure to check with the financial aid office.
Where Do I Go for Student Loan Entrance Counseling?
Student loan entrance counseling can be mandatory if you have federal loans or attend a school that requires it. If you have private student loans, there are nonprofit organizations offering services to help students with financial wellness, budgeting, and understanding their loans.
Federal Student Loan Counseling
Before federal loans are disbursed, the government requires borrowers to complete student loan entrance counseling to understand their rights and what’s expected of them. The process is automated and online, and it takes up to half an hour to complete.
Similarly, when students graduate or are enrolled less than half-time, they must complete exit counseling online. Don’t just do this to check the box. The student loan exit counseling is designed to help you establish a solid foundation for dealing with student loans.
Loan Servicers
The government contracts with several loan servicers to handle federal student loans. It should be relatively easy to get in touch with a servicer by phone, email, or even online chat. It’s in the companies’ best interest to make sure you make payments.
Their agents typically work with borrowers to help them understand their debt, figure out the best repayment plan, and process requests for deferment or forbearance. The quality of advice can vary, but this can be a helpful first step for getting answers to questions or getting on track with repayment.
National Foundation for Credit Counseling
Founded in 1951, this is a nonprofit that offers financial counseling on various issues, including student loan debt. The group’s certified credit counselors work with people to help them understand the benefits and drawbacks of various student loan repayment plans, how to make payments affordable, whether consolidation makes sense for you, and how to reduce the overall interest you pay.
They can also discuss options for student loan forgiveness or rehabilitation, plus they take into account an individual’s entire financial situation, rather than looking at student loans in a vacuum. Fees charged by NFCC counselors may vary based on the type of support that is being provided and state laws. Frequently, counseling services are provided at low, or even no, cost. Counselors offer to provide a comprehensive plan for managing student debt.
American Student Assistance
This nonprofit offers online resources and complimentary advice to help students plan for student loan repayment. You can reach one of their counselors by phone, email, Twitter , or Facebook with questions about student debt or other money matters.
The group also has several centers in Massachusetts that offer in-person advice on managing student loans, as well as career planning and general personal finance.
Clearpoint
This is a nonprofit agency that offers student loan counseling . Their counselors examine your overall financial situation and discuss the best way forward, including repayment plans, consolidation, or rehabilitation.
They say they may suggest a debt management program if you are also having difficulty with credit card debt. The debt management program costs up to $50 , and the group says it will remove or reduce fees for clients with financial hardship. Student loan counseling through Clearpoint costs $99.
GreenPath
GreenPath , another nonprofit, offers to review all your loans and provide an “unbiased assessment” and a customized plan based on your situation.
They also offer a higher tier of service if you want more in-depth analysis or if you want them to serve as your advocate by contacting the loan servicer on your behalf (though you are probably able to handle those communications on your own). The initial consultation is free and enhanced counseling costs $200.
Why is Student Loan Entrance Counseling Important?
Figuring out how to get a student loan is just the beginning. Repaying loans is a long-term responsibility not to be taken lightly. In fact, the average borrower takes around 20 years to pay off their student loans.
Student loan entrance counseling unpacks how interest accrues over time and best practices for managing repayment. This can limit the total interest paid over the life of the loan and steer clear of late fees or default.
Lenders can report delinquent payments of 90 days or more to the major credit bureaus, which remain on your credit report for seven years.
Making the most of student loan entrance counseling can help avoid these consequences and joining the 21% of borrowers whose student loan balance increases over the first five years of repayment.
Student Loan Help With SoFi
SoFi members get access to a licensed financial advisor as well as one-on-one career coaching at no extra cost. That means you can access complimentary advice on tackling your student loans, or potentially increasing your income, anytime. You become a member when you refinance your student loans with SoFi.
Depending on your situation, refinancing itself can help lower the monthly payments or interest rate on your loan. Refinancing isn’t for everyone since it means giving up access to federal programs such as deferment, forbearance, and income-based repayment.
But if refinancing is right for you, at SoFi it comes with a built-in human advisor, an easy-to-understand interface, and unemployment protection (if you lose your job and qualify for this protection, SoFi may pause your payments and a career coach can help you find a new position).
The Takeaway
Student loan entrance counseling is required for all federal student loan borrowers and is designed to inform borrowers of how student loans work with the goal of minimizing the number of students who default on their student loans. In addition to the student loan entrance counseling provided by the federal government for federal student loans, there are also a number of nonprofits that offer student loan counseling to borrowers who would like help navigating the student loan repayment process.
Some borrowers may find the student loan refinancing makes sense for their repayment strategy. If that’s the case for you, consider SoFi, where there are no fees to refinance.
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SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.
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Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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