With graduation just around the corner, most students are wrapped up in the job hunt, and starting out on their career path. For students graduating with student loan debt, finishing school also means entering repayment.
If you hold a federal student loan, you might not remember entrance counseling from your freshman year and all the helpful advice it included. That is why all federal loan holders are also required to go through exit counseling.
What is Student Loan Exit Counseling?
Student loan exit counseling is an online course through StudentLoans.gov that walks students through the federal loan(s) they signed up for to pay for their education.
The purpose of the program is to prepare student borrowers for repayment. It is mandatory for students who took out subsidized, unsubsidized or PLUS loan(s) under the Direct Loan Program. Private student loan borrowers are not required to complete exit counseling.
When Do I Need to Go Through Student Loan Exit Counseling?
You must complete exit counseling each time you drop below half-time enrollment, graduate, or leave school and enter a repayment period.
Some schools will have alternative or added exit counseling requirements for students, so be sure to get in touch with your school’s financial aid center to confirm you have checked all the boxes.
Where Do I Go for Student Loan Exit Counseling?
Students ready to complete exit counseling will log into StudentLoans.gov to complete the online course. You will want to have the following on hand:
- Your verified FSA ID
- Income information
- Financial aid information
- Expected and current living expenses
- Contact information for yourself, your next of kin, two references, and your future employer if you already have a job lined up
If you complete the course but still have any questions about your student loan(s), reach out to the financial aid office for help. That’s what they are there for! You can also browse the Federal Student Aid website for answers specific to your federal loan(s).
Why is Student Loan Exit Counseling Important?
According to the Federal Student Aid website, this process will take about 20 to 30 minutes to complete, and students should not rush through the process. There is a lot of useful information in exit counseling and is a great resource for borrowers entering repayment:
Understanding your repayment terms
You might have done a lot of research when deciding to take out your student loan(s), but since that time you might have forgotten what terms you selected. This is a great time to review the terms of your existing federal loan(s) and, most importantly, when you will need to start making payments.
Options for repayment
This section will go over all of the repayment plans available for your specific federal loan(s) when making payments. These include:
- Standard Repayment
- Graduated Repayment
- Extended Repayment
- Pay As You Earn Repayment
- Revised Pay As You Earn Repayment
- Income-Based Repayment
- Income-Contingent Repayment
- Income-Sensitive Repayment
Not all of these options are available for every loan type or borrower, so be sure to look into each option for your loan carefully before making a decision.
Another option for repayment is refinancing with a private company. Refinancing is the process of replacing an existing loan with a new loan. Borrowers refinance their loan(s) in order to get a lower interest rate and potentially make one monthly payment as opposed to multiple payments to various servicers. When refinancing it is important to note that you could lose the perks of federal repayment plans, but could pay less in interest over time.
How to avoid defaulting on your loans
Two important terms you don’t want to see on your loan account:
- Delinquency: A loan becomes delinquent when a loan payment is not received on time.
- Default: For federal student loans, default is when you have failed to make the agreed-upon periodic payments on a loan after a number of days in delinquency. For more information, please visit the Federal Student Aid website.
Neither are good for a borrower and their credit score, but defaulting on a loan is decidedly worse. The exit counseling course provides borrowers with information on how to avoid these two events, and what to do if you can’t avoid delinquency.
Like entrance counseling, the final section of exit counseling covers broader personal finance questions that borrowers might have. Topics include:
- The importance of having an emergency fund
- How to build a monthly budget
- Paying off your credit balance in full
- What a credit score is and how you can build or hurt that score
With the end of college and your entrance into the workforce, these topics are more important than ever, and exit counseling can provide some strong tips to start borrowers off on the right foot.
This article was written by Carolyn Pairitz Morris, Senior Editor at Earnest.