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After filling out the FAFSA and getting your financial aid letter, you might think that you are all set to start school with a loan. But there is just one last box to check, entrance counseling.
Unlike an iTunes Terms of Service, you won’t want to just breeze through this final step to receive your federal loan. Entrance counseling is packed full of useful information on your loan, setting up a budget, and laying a solid foundation in your financial education.
What is Student Loan Entrance Counseling?
Student loan entrance counseling is a mandatory process that is intended to help borrowers better understand the responsibilities that they will be taking on with this direct loan.
The goal is to lower the rates of delinquency and default in student loan borrowers. The entrance counseling will walk borrowers through the importance of repayment, and the consequences of failing to do so.
It will also discuss important points like how interest accrues and is capitalized. Finally, it will discuss repayment options for students and resources they have access to as borrowers.
When Do You Need to Go Through Student Loan Entrance Counseling?
Borrowers will need to go through entrance counseling the first time that they take out a federal student loan. Specifically, all students taking out Direct Subsidized or Unsubsidized loans for the first time. Graduate students taking out Direct PLUS loans will also need to go through federal counseling, even if they have already previously completed counseling for a subsidized or unsubsidized loan in the past.
Your loan will not be disbursed until you have completed entrance counseling, so you will want to complete the process before the first scheduled distribution. Reach out to your financial aid office to get that date.
Before you enter repayment you will also need to go through an exit counseling session, where the lessons of entrance counseling are restated in case you need a refresher.
Where Do I Go for Student Loan Entrance Counseling?
To complete your entrance counseling you will need to log into the StudentLoans.gov site. According to the site, it will take about 20 to 30 minutes to complete once you get started. You will want to have the following on hand to save time:
- Federal student aid ID
- The name of the school you will attend
- Income information
- Financial aid information
- Expected and current living expenses
Some schools will have their own entrance counseling as well, so make sure to check with the financial aid office to be sure you have checked every box.
Why is Student Loan Entrance Counseling Important?
While not only required, entrance counseling can also be a great source of information and resources for borrowers:
Understanding your loan terms
During entrance counseling, you will be able to enter your own loan information and be able to see how the debt will grow over time. It is important to start your education knowing how much you can borrow, how interest will accrue, and key points about the loan you have taken on.
Managing your college spending
Before you even step on campus, you will be able to input your own budget information and see how much you will need to save for each semester. Having a realistic budget for your spending while in school can help you set saving goals and know how much cash you will have for discretionary spending.
Understanding how loan repayment works
You might have just taken out this loan, but you should always have a repayment plan when you take on a financial responsibility. How much will you save on your loan if you make payments while in school? Entrance counseling can help you understand the impact of in-school payments on the life of your loan.
How to avoid defaulting on your loans
Steps to avoid delinquency and default are arguably the most important points that entrance counseling hit. Failing to make payments on your student loans can have a huge impact on your credit score. Understanding all the ways to avoid a negative hit to your financial future is key for borrowers.
The final section of entrance counseling offers broader financial health tips that not just student borrowers should know. Topics include:
- What a credit score is and how you can build or hurt that score
- Building a budget
- Opening a savings account
- Starting an emergency fund
Many of these topics might be new to students who haven’t been financially independent before. This final section is a great introduction to broader financial topics that are important to understand sooner rather than later.