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The Guarantor of Choice SM |
Creating Consistency in Educational Finance: A Training Curriculum
Module 4: Entrance and Exit Counseling
Entrance counseling
- Learning objectives
- Regulatory requirements for entrance counseling sessions
- Additional information
- Types of loans
- Becoming familiar with student demographics
- Integrating the institution's policies and procedures
Learning objectives
At the end of this module, you will:
- Be able to provide consistent information to prospective borrowers
- Know the regulatory requirements for conducting an entrance counseling session
- Recognize the importance of understanding your institution's student demographics
- Understand how to integrate into the session institutional policies and procedures
Regulatory requirements for entrance counseling sessions
All first time federal Stafford loan borrowers are required to complete an entrance counseling session before receiving their first disbursement, unless a student previously borrowed a federal Stafford or SLS loan from either the Federal Family Education Loan Program (FFELP) or Federal Direct Loan Program at another institution. However, some schools require all first time borrowers at their school to complete an entrance counseling session.
All first time federal Grad PLUS loan borrowers are also required to complete an entrance counseling session before receiving their first disbursement, unless a student previously borrowed a Federal PLUS loan or Direct PLUS loan.
Schools conduct entrance counseling sessions either through in-person sessions, audio-visual presentations, or interactive electronic means. For all forms of counseling, the school has the responsibility to make sure that an individual with expertise in Title IV programs is available to answer questions from the students shortly after the counseling.
If the session is conducted in person, then the individual conducting the session has the responsibility for becoming thoroughly knowledgeable about the regulatory requirements listed below.
The following information must be provided to the Stafford Loan borrower:
- Use of the Federal Stafford Loan Master Promissory Note
- Seriousness and importance of the student's repayment obligation
- Consequences of defaulting on a student loan (e.g., adverse credit history, litigation, federal offsets)
- Student's obligation to pay back the student loan even if the student is not satisfied with the quality of education received, does not find employment after graduation, or does not complete the program of study
- Sample monthly repayment amounts (based on a range of student indebtedness levels or on the average indebtedness of student borrowers at that school or in a particular program of study at that institution)
Graduate/Professional Student PLUS borrowers
The information that must be provided to a Graduate/Professional Student PLUS (Grad PLUS) borrower depends on whether or not the borrower has previously received a Stafford loan.
A borrower with no prior Stafford loan must be provided with the same information as provided in Stafford loan entrance counseling.
For a borrower with a prior Stafford loan, the school must notify the borrower of maximum Stafford loan amount for which he or she is eligible, and provide a comparison of terms between Stafford and Grad PLUS regarding:
- Interest rates
- When interest accrues
- When the loans enter repayment
This information may be provided through the financial aid award letter process, if done so before certification.
Additionally, all Grad PLUS borrowers must be provided sample repayment amounts based on:
- A range of debt levels, or
- Average indebtedness of Grad PLUS borrowers at the school or in a specific program of study, or
- Average indebtedness of borrowers who have both Stafford and Grad PLUS loans at the school or in a specific program of study.
If a school prefers to require all Grad PLUS borrowers to complete comprehensive counseling, it may do so.
Additional information
In addition to the requirements stated above, it is recommended that the following information be provided to students so that they have a complete understanding of the obligation to pay back the student loan:
- An explanation about the various sources of financial aid available to the student and to the parent
- A description of the terms and conditions of each source of aid including loan limits, loan fees, and interest rates
- A discussion of the school's policy on the frequency of annual loan limits
- A strong recommendation to the student to keep all documentation related to their student loans and other financial aid received
- A reminder to keep the lender informed of any changes in their contact information, enrollment status, or Social Security number
- A summary of the student's rights and responsibilities
- An overview of repayment, deferment, forbearance, consolidation and loan cancellation options
- An explanation of loan sales and servicing of loans
- The institution's satisfactory academic progress policy
- The institution's refund policy
- General information on budgeting living expenses and other aspects of personal financial management
Moreover, in delivering entrance counseling to students, it is important to explain the different types of loans available to help pay for educational expenses. Outlined below is a description of each of the student loan types:
Types of loans
Federal Stafford Loans (Subsidized)
- A loan for students demonstrating financial need
- Student must be enrolled at least half time
- Interest is paid by the Department of Education while the borrower is in school, during grace period, and during authorized periods of deferment
- Student is not responsible for paying the interest on the loan while he/she is enrolled in a postsecondary institution at least half time
- Six months after the student graduates, drops below half time, or withdraws, the student becomes responsible for paying both principal and interest on the loan
- Origination fees and federal default fees, if charged to the borrower, will be withheld proportionately from each disbursement
- Repayment generally is scheduled over a maximum 10-year period, not including authorized periods of deferment or forbearance
- Deferments are available for specific situations
- Graduated, income-sensitive, and extended repayment terms are available
- 6.8 percent for graduate students
- Stafford interest rates for undergraduate subsidized Stafford loans (FFELP and Direct) will be reduced from 6.8% to 3.4% over 5 years:
July 1, 2006, and before July 1, 2008 6.8% July 1, 2008, and before July 1, 2009 6.0% July 1, 2009, and before July 1, 2010 5.6% July 1, 2010, and before July 1, 2011 4.5% July 1, 2011, and before July 1, 2012 3.4% Note: The interest rate for each loan period remains fixed for the life of the loan.
Federal Stafford Loans (Unsubsidized)
- A non-need-based loan available to independent students, dependent students who do not qualify for a subsidized Stafford loan, and for dependent students whose parents are unable to obtain a PLUS loan
- Unsubsidized Stafford loans are the same as subsidized Stafford Loans, except that the Department of Education does not pay interest on the loan at any time and the student is responsible for paying all interest that accrues during the life of the loan
- Fixed interest rate of 6.8 percent for loans disbursed on or after July 1, 2006
- Interest payments can be deferred along with payments on the principal until six months after the student graduates, drops below half time, or withdraws
- Making interest payments on the loan while the student is in school will help reduce the overall cost of borrowing and may reduce their monthly payment once they enter repayment
| Federal Stafford Loan maximums1 Annual limits per year of study |
|
|---|---|
Dependent undergraduates2 |
|
| Year | Max. (subsidized and unsubsidized)3 |
| First year | $5,500 — no more than $3,500 of this amount may be subsidized |
| Second year | $6,500 — no more than $4,500 of this amount may be subsidized |
| Third year and beyond | $7,500 — no more than $5,500 of this amount may be subsidized |
| Independent undergraduates2 (and dependent undergraduates whose parents are unable to borrow under the PLUS Loan Program) |
|
| Year | Max. (subsidized and unsubsidized)3 |
| First year | $9,500 — no more than $3,500 of this amount may be subsidized |
| Second year | $10,500 — no more than $4,500 of this amount may be subsidized |
| Third year and beyond | $12,500 — no more than $5,500 of this amount may be subsidized |
| Graduate and professional students | |
| Year | Max. (subsidized and unsubsidized)3 |
| For any year of study | $20,500 — no more than $8,500 of this amount may be subsidized |
| Aggregate limits3 Maximum amounts over academic career |
|
| Type of student | Max. (subsidized and unsubsidized)3 |
| Dependent undergraduates | $31,000 — no more than $23,000 of this amount may be subsidized |
| Independent undergraduates (and dependent undergraduates whose parents are unable to borrow under the PLUS Loan Program) | $57,500 — no more than $23,000 of this amount may be subsidized |
| Graduate and professional students | $138,500 — no more than $65,500 of this amount may be subsidized |
1 Certain health profession students may qualify for higher limits.
2 All undergraduate Stafford annual loan limits are subject to proration.
3 The borrower may receive less than the maximum if he or she receives other financial aid that is used to cover the cost of attendance. Keep in mind that the federal government will pay interest on only subsidized Stafford loans while the student is in school.
Federal Perkins Loans
- Available to undergraduate and graduate students who demonstrate financial need
- School is the lender and therefore loan must be paid back to the school
- Interest does not begin accruing on the loan until nine (9) months after the student graduates, drops below half time, or withdraws
- Repayment generally is scheduled over a maximum 10-year period, not including periods of authorized deferment or forbearance
- Annual limit is $4,000 for undergraduates, $6,000 for graduates
- Aggregate limit is $20,000 for undergraduates, $40,000 for graduates
- Fixed interest rate of 5 percent
- No origination or guarantee fee
- May qualify for loan forgiveness (e.g., teachers serving a low-income school, special education school, or those teaching in a designated subject shortage area — students can contact the school from where they received the Perkins loan to find out more details about loan forgiveness)
Student's eligibility for the loans mentioned above is determined by information provided on the Free Application for Federal Student Aid (FAFSA).
Federal PLUS
- For parents of dependent students who need additional funds to help cover educational expenses
- Loans disbursed on or after July 1, 2006, have a fixed interest rate of 8.5 percent
- Borrower must be credit-worthy or obtain a credit-worthy endorser
- Interest and principal payments on the loan begin within 60 days of when the loan is fully disbursed
- Deferments for specific situations and forbearance may be available
Graduate/Professional Student PLUS
- For graduate/professional students who need additional funds to help cover educational expenses
- Fixed interest rate of 8.5 percent
- Borrower must be credit-worthy or obtain a credit-worthy endorser
- Interest and principal payments on the loan begin within 60 days of when the loan is fully disbursed
- Deferments are available while the student is attending school at least half time; other deferments for specific situations and forbearance may be available
Emergency Tuition/Short-Term Loans
- Schools sometime make small loans available to those students who may otherwise not be eligible for federal student loans or who are waiting on their federal student loans to be processed
- The repayment period on these types of loans typically begins once the funds are disbursed to the student
Private Loans
- Private, non-federal loans may be available to students to help cover their educational expenses
- Student is encouraged to first determine if he/she is eligible for federal student loans before applying for a private loan; private loans should be considered as a last resort
- Private loans usually have a higher interest rate, require the borrower to be creditworthy, and may not include the same benefits as federal student loans
- The terms and conditions of private loans vary from provider to provider and should be thoroughly researched
Becoming familiar with student demographics
Student populations differ from one college to another. Therefore, it is important that financial aid officers study the demographics of its population on campus. For instance, new financial aid officers should learn about the median debt amount for students graduating from the institution, and how it compares to the median debt amount for students in the state and at other similar institutions.
Additionally, in instances where a school enrolls a large percentage of first-generation college students, financial aid officers should provide in-depth credit and debt management information, budget planning tools, and collateral demonstrating standard debt-to-income ratios. These resources will help the students — many of whom may come from families who are not savvy about borrowing — prepare for successful repayment of student loans.
Integrating the institution's policies and procedures
In preparation for conducting an entrance counseling session, financial aid officers should also learn about the institution's policies and procedures and provide this information to students. Key institutional policies and procedures include:
- Satisfactory academic progress (SAP) for financial aid eligibility (including appeals process)
- Academic requirements for continuing enrollment, if different from SAP
- Withdrawal procedures
- Refund policy
- Institution's packaging philosophy
- Other policies and procedures important to the institution
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© 2008 Texas Guaranteed Student Loan Corporation |
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