Americans now hold a total of $1.77 trillion in student debt (including federal and private loans). 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.
You may be concerned about how you will resume federal loan payments in October (after a three-year pause) or, if you’re or still in school, after you graduate. If your finances have changed, you may wonder if your current payment plan still makes the most sense or if you can qualify for a forgiveness or forbearance plan. If you’re still in the process of getting loans, you likely have questions about how you will manage repayment and when it willl start.
Figuring all this out can be hard on your own. Fortunately, there are counseling services available to help you navigate student debt no matter what stage of the process you are in.
For example, the federal government offers free “entrance counseling,” as do many loan servicers and lenders. In addition, there are a number of student loan counseling services now available that promise to help you manage your student loan repayment. Among them, nonprofit credit counseling agencies tend to be the most trustworthy and affordable (in fact, an initial consultation is often free).
Here’s a look at how student loan counseling works and how to determine the best path for managing student loan debt.
What Not to Do If You Need Student Loan Help
If you have questions or concerns about your student loans, ignoring them generally isn’t the answer, especially if that means falling behind on student loan payments. At any given time, roughly 7% 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.
When you’re ready to get help, however, you’ll want to 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.
💡 Quick Tip: Some lenders help you pay down your student loans sooner with reward points you earn along the way.
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 I Go For Student Loan 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.
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 Counseling?
Whether you have federal or private student loans, there are services available to help you with financial wellness, budgeting, and understanding your 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 organization 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.
Counselors offer to provide a comprehensive plan for managing student debt, taking an individual’s entire financial situation into account, rather than looking at student loans in a vacuum. Though NFCC doesn’t provide services for free, fees are typically low or based on how much you afford.
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.
The initial consultation is free but 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, for a fee.
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.
If you’re in the process of taking out student loans, you’ll want to make sure you fully understand what the total cost of the loan will be and what repayment will look like, including what your payments will be, when they will start, and how long they will last. Student loan entrance counseling unpacks how interest accrues over time and best practices for managing repayment. This can help you minimize 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 you avoid these consequences and joining the 21% of borrowers whose student loan balance increases over the first five years of repayment.
💡 Quick Tip: Would-be borrowers will want to understand the different types of student loans that are available: private student loans, federal Direct Subsidized and Unsubsidized loans, Direct PLUS loans, and more.
The Takeaway
Student loan entrance (and exit) 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, there are a number of nonprofit agencies that offer student loan counseling to borrowers who would like help navigating the student loan repayment process. Many of these organizations will offer some general student loan counseling for free, while more in-depth help typically carries a fee. Many private lenders will also offer guidance on repayment free or charge.
If you already have student loans, you may find that student loan refinancing makes sense for your repayment strategy. If, on the other hand, you’re still in the process of financing for your education, you may want to explore tapping a variety of options, including federal financial aid and federal and private student loans.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
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