A Training Curriculum

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Creating Consistency in Educational Finance: A Training Curriculum

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Module 4: Entrance and Exit Counseling

Entrance counseling

Learning objectives
Statutory and regulatory requirements for entrance counseling sessions
Graduate/Professional Student PLUS borrowers
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 borrowers
Know the statutory and regulatory requirements for conducting an entrance counseling session
Recognize the importance of understanding your institution's student demographics
Understand how to integrate institutional policies and procedures into the session

Statutory and 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 may conduct entrance counseling sessions either through:

in-person sessions, or
interactive electronic, or written means, with the borrower's acknowledgement of receipt.

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 students' questions shortly after the counseling.

Also, it's important to remember that the school must maintain documentation substantiating its compliance with entrance and exit counseling requirements for each borrower.

If the session is conducted in person, then the individual conducting the session has the responsibility for becoming thoroughly knowledgeable about the requirements listed below.

The following information must be provided to the Stafford Loan borrower:

Use of the Federal Stafford Loan Master Promissory Note
Seriousness of, and importance of, the student's repayment obligation
Consequences of defaulting on a student loan (e.g., adverse credit history, litigation, federal offsets, delinquent debt collection procedures)
Student's obligation to pay back the student loan even if the student is not satisfied with the quality of education received or its services, does not find employment after graduation, does not graduate, or does not complete the program of study within the regular time for program completion
Sample monthly repayment amounts (based on several levels of indebtedness for borrowers with subsidized and unsubsidized Stafford (and Grad PLUS, as appropriate), or on the average cumulative indebtedness of student borrowers at that school or in the same program of study at that school)
The effect of accepting the loan on eligibility for other forms of student financial assistance
How interest accrues and is capitalized during periods when the interest is not paid by either the borrower or the Secretary
Option to repay the interest on unsubsidized Stafford and Grad PLUS loans while in school
Definition of half-time enrollment during regular terms and summer school, if applicable
Consequences of dropping below half-time
Importance of contacting the appropriate offices if the borrower withdraws, for purposes of providing exit counseling
Information on the National Student Loan Data System (NSLDS) and how the borrower can access his/her records
Name and contact information for questions regarding borrower's rights and responsibilities, or the terms and conditions of the loan

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 the maximum Stafford loan amount for which he or she is eligible, and provide a comparison of terms between Stafford and Grad PLUS loans 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 before certification.

Additionally, all Grad PLUS borrowers must be provided sample repayment amounts based on:

several levels of indebtedness of:
- Borrowers with subsidized and unsubsidized Stafford loans; and,
- As appropriate, graduate borrowers with subsidized or unsubsidized Stafford or Grad PLUS loans at the school or in a specific program of study; or
Average cumulative indebtedness of other borrowers in the same program at the same school

If a school prefers to require all Grad PLUS borrowers to complete comprehensive counseling, it may do so. Comprehensive counseling would entail a counseling session which covers all information regardless of whether the Grad PLUS borrower has received a prior Stafford loan or not.

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 borrower'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 fee and federal default fee, 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
Standard, Graduated, income-sensitive, income-based and extended repayment terms are available
6.8 percent fixed interest rate for graduate students
Stafford interest rates for undergraduate subsidized Stafford loans (FFELP and Direct) are as follows:
- 5.6% on or after July 1, 2009, and before July 1, 2010
- 4.5% on or after July 1, 2010, and before July 1, 2011
- 3.4% on or after July 1, 2011, and before July 1, 2012
- 6.8% on or after July 1, 2012

Federal Stafford Loans (Unsubsidized)

A non-need-based loan available to independent students, to dependent students who do not qualify for a subsidized Stafford loan, and to 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 borrower is in school will help reduce the overall cost of borrowing and may reduce his or her monthly payment once he or she enters 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
1st year	$9,500 — no more than $3,500 of this amount may be subsidized
2nd year	$10,500 — no more than $4,500 of this amount may be subsidized
3rd 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	Maximum aggregate loan amounts over academic career — subsidized and unsubsidized
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 (and dependent undergraduates whose parents are unable to borrow under the PLUS Loan Program)
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 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 only on subsidized Stafford loans while the student is in school.

Federal Perkins Loans

Available to undergraduate and graduate students who demonstrate financial need
The school is the lender and therefore the 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 $5,500 for undergraduates, $8,000 for graduates
Aggregate limit is $27,500 for undergraduates, $60,000 for graduates
Fixed interest rate of 5 percent
No origination or default fee
May qualify for loan cancellation (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 cancellation)

Student's eligibility for the loans mentioned above is determined by information provided on the Free Application for Federal Student Aid (FAFSA).

Federal PLUS Loans

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 creditworthy or obtain a creditworthy endorser
Interest and principal payments on the loan begin within 60 days of when the loan is fully disbursed
Borrower may defer payment while the student or borrower is enrolled at least half-time, and during the six months following the student's drop to less than half-time enrollment
Deferments for specific situations and forbearance may be available

Graduate/Professional Student PLUS Loans

For graduate/professional students who need additional funds to help cover educational expenses
Fixed interest rate of 8.5 percent
Borrower must be creditworthy or obtain a creditworthy 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 and during the six months following the student's drop to less than half-time enrollment; other deferments for specific situations and forbearance may be available

Emergency Tuition/Short-Term Loans

Schools may 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 the student populations on their campuses. For instance, new financial aid officers should learn about the median debt amount for students graduating from their institution, and how it compares to the median debt amount for students in the state and at other similar institutions.

Detailed information regarding indebtedness levels at most schools can be found online in TG's School Fact Sheets at www.tgslc.org/schools/

Additionally, in instances where a school enrolls a large percentage of first-generation college students, it is especially important for financial aid officers to 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.

Some useful financial literacy resources can be found online at www.aie.org.

Integrating the institution’s policies and procedures

In preparation for conducting an entrance counseling session, financial aid officers should also be prepared to provide students with information about the institution's policies and procedures. Key institutional policies and procedures include:

Satisfactory academic progress (SAP) for financial aid eligibility (including the appeals process)
Academic requirements for continuing enrollment, if different from SAP
Withdrawal procedures
Refund policy
Other policies and procedures important to the institution