The HEA includes counseling requirements when borrowers first incur loans and after they withdraw or graduate. Initial counseling is supposed to occur prior to the release of the first loan disbursement. In general, schools must ensure that entrance counseling is conducted with each direct subsidized or unsubsidized loan student borrower prior to making the first disbursement unless the borrower has received a prior federal loan. Schools must also provide entrance counseling for student PLUS loan borrowers unless that borrower has received a prior PLUS loan.
1. What a Direct Loan is and how the loan process works;
2. Managing education expenses;
3. Other financial resources to consider to help pay for education;
4. One’s rights and responsibilities as a borrower.
The counseling must include comprehensive information on the terms and conditions of the loan and on borrower responsibilities. The session may be conducted in person, on a separate written form provided to the borrower that the borrower signs and returns, or online or by interactive electronic means with the borrower acknowledging receipt of the information.
The school must also ensure that an individual with expertise in the Title IV programs is reasonably available after the counseling to answer questions.
1. Explain the use of a MPN;
2. Emphasize to the borrower the seriousness and importance of the repayment obligations;
3. Describe the likely consequences of default;
4. Emphasize that the borrower is obligated to repay the full amount of the loan even if the borrower does not complete the program, is unable to obtain employment after completion, or is otherwise dissatisfied with or does not receive the educational or other services that the student borrower purchased from the school;
5. Inform the borrower of sample monthly repayment amounts based on a range of student levels of indebtedness or the average indebtedness of other borrowers in the same program at the same school;
6. To the extent practicable, explain the effect of accepting the loan on the eligibility of the borrower for other forms of student financial assistance;
7. Provide information about how interest accrues and is capitalized;
8.Inform the borrower of the option to pay the interest on an unsubsidized loan while the borrower is in school;
9. Explain the definition of half-time enrollment at the school and the consequences of not maintaining half-time enrollment;
10. Explain the importance of contacting the appropriate offices at the school if the borrower withdraws prior to completion;
11. Provide information on the National Student Loan Data System; and
12.Provide the name of and contact information for the individual the borrower may contact if the borrower has any question about rights and responsibilities or the terms and conditions of the loan.
Schools must provide some information only to first-time borrowers. Specifically, in these circumstances, the counseling must include information about the limitation on eligibility for direct subsidized loans and possible borrower responsibility for accruing interest, including the possible loss of eligibility for additional direct subsidized loans, how a borrower’s maximum eligibility period, remaining eligibility period, and subsidized usage period are calculated, and the impact of borrower responsibility for accruing interest. “First time” borrowers are defined as individuals who have no outstanding balance of principal or interest on a Direct Loan Program or FFEL Program loan on July 1, 2013, or on the date the borrower obtains a Direct Loan Program loan after July 1, 2013.
There are also entrance councounseling requirements for graduate or professional student PLUS borrowers. These requirements vary depending on whether the borrower has previously received a Stafford loan.
The Direct Loan Program allows schools to adopt alternative approaches for initial counseling. These alternatives must be designed to target borrowers who are most likely to default on repayment and to provide them with more intensive counseling and support services.
There are separate requirements for exit counseling. A school must ensure that this counseling occurs shortly before the student borrower ceases at least half-time study at the school. The counseling must be in person, by audiovisual presentation, or by interactive electronic means. In each case, the school must ensure that an individual with expertise in Title IV student aid is reasonably available to answer questions.
If a student borrower withdraws without the school’s prior knowledge or fails to complete the exit counseling as required, counseling must be provided either through interactive electronic means or by mailing written materials to the borrower’s last known address within thirty days after the school learns that the borrower has withdrawn or failed to complete the counseling.
School officials may send written counseling materials to an e-mail address provided by the student borrower and that is not associated with the school sending the material.
1. Inform the borrower of the average anticipated monthly repayment amount based on the borrower’s indebtedness or on the average indebtedness of student borrowers who have obtained subsidized and unsubsidized loans, only PLUS loans, or all types of loans, depending on the types of loans the student borrower has obtained;
2. Review the available repayment plan options and the difference in interest paid and total payments under each plan;
3. Explain the options to prepay;
4. Provide information on the effects of loan consolidation;
5. Include debt management strategies;
6. Explain how to contact the party servicing the loans;
7. Explain the use of an MPN;
8. Emphasize the seriousness and importance of the repayment obligation;
9. Emphasize that the borrower is obligated to repay the full amount of the loan even if the borrower does not complete the program, is unable to obtain employment after completion, or is otherwise dissatisfied with or does not receive the educational or other services that the student borrower purchased from the school;
10. Describe the likely consequences of default;
11. Provide a general description of the terms and conditions under which a borrower may obtain full or partial forgiveness of loans;
12. Review the information about the availability of the Student Loan Ombudsman’s office;
13. Inform the borrower of the availability of loan information in the National Student Loan Data System;
14. A general description of the types of tax benefits that may be available; and
15. Require the borrower to provide current contact information.
Similar to entrance counseling, first-time borrowers must also receive information about the maximum eligibility period, the sum of the borrower’s subsidized usage periods, the consequences of continued borrowing or enrollment, and the impact of the borrower becoming responsible for accruing interest on total student debt.
By most accounts, counseling is no more than a formality, one of many hoops students jump through to get their student aid checks.