If federal student loans are part of the plan to pay for college (and for most students they are!), then college entrance loan counseling will also be on the “to do” list for students heading to college. Years ago, students were expected to read the paperwork about their loan and were responsible for understanding the fine details. (We’re pretty sure that didn’t happen.) Today’s federal government has a pretty cool website to walk students through what all those terms mean and what they can expect in the future with their loan.
Who needs to complete this counseling?
Those required to complete the entrance loan counseling include:
- Undergraduates taking out Direct Subsidized Loans and Direct Unsubsidized Loans
- Graduate or professional students taking out Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans
- Some colleges have their own alternative counseling
Only those who have not completed the counseling before need to participate. The website says it will take 20 to 30 minutes to complete. Students need their FSA ID, college name, and anticipated financial details.
Guess what! Your client’s and their students don’t need to have a FSA ID to explore the loan counseling website.
They can take a look by using this link to open the site. Once in, click on the “start demo” button. The sections include: understanding your loans, manage your spending, plan to repay, avoid default, and finances: a priority.
Client’s Understanding Their Loans
Throughout the website, your client’s students can find lots of handy diagrams and explanations. Loan and financial terminology can be confusing–even for adults. So, having students walk through this will help them understand how borrowing money works.
In the demo, they can fill in anticipated loan figures. They’ll need to remember to use a total figure for all four years. The website recommends some numbers and an estimated interest rate for demonstration purposes.
They’ll notice many reminders about common sense borrowing. The purpose of this is to counsel the students after all to hopefully not make bad decisions–don’t borrow more than they need.
Next is a review of loan basics including how loans work (see graphic) as well as teaching terms like “interest accrual” and “capitalized interest.” This section wraps with a look at where money to pay for college comes from, the types of federal loans, and important information to know about the federal loan limits they are allowed to borrow each year.
Manage Your Spending
The Manage Your Spending section starts with a cool look at the schools expense budget. The student’s can enter how much money they’ll receive from all sources like scholarship, work, and parental contribution. Then they can plug in some information about what expenses will be for the year while in college. The result is a determination of whether or not they will have enough money to pay the bills.
Next is a walkthrough of smart budgeting for expenses, tips for borrowing responsibly, the effect of paying interest while in school, and the importance of using up federal loan dollars before looking at private student loans. (We always recommend private loans be used only to fill a small gap.)
Plan to Repay
This section deals with life after college. First, they’ll plug in some numbers for income. (They can find good estimated income figures by at CareerOneStop.org.) The numbers they entered for the loan will carry forward. They’ll see estimated monthly payment figures and get the chance to toggle between different repayment options with their monthly payment amount, total amount they’ll pay over the life of the loan, and the length of the loan.
This section wraps with a walkthrough of repayment (when to start making payments, what if I pay off my loan early) and navigating repayment (who do I make payments to, how do I change my repayment plan).
Deferment, forbearance, forgiveness, cancellation, discharge, delinquency, and consolidation are among the terms discussed in this section. Lots of terminology to review!
Finances: A Priority
The last section is a summary of smart financial practices. Plan for the future with smart saving and spending practices. They even touch on good credit habits and protecting the student’s identity.
The program wraps with a summary of the student’s numbers and some graphic representations of what they will take on with their loans and how many years they’ll will be paying them. There are some additional resources and videos as well.
All in all a great tool!
Let’s face it. Students know almost nothing about credit, borrowing, and how it all works. Walking through this college entrance loan counseling is a great way for them to get their feet wet with all the jargon and to understand the impact of borrowing on their future.