LIFE AFTER COLLEGE CAN be a challenging period full of changes. If you have federal student loans, they will enter repayment six months after you leave school or drop below half-time enrollment, and that can be a big transition both financially and personally.
Further complicating matters, many student loan borrowers realize near the end of their education journey that they have forgotten the information needed to manage student loans in repayment, especially borrowers who started their education four or more years ago.
That’s where federal student loan exit counseling comes in. You likely learned a lot during your entrance counseling at the start of your education journey when you accepted federal student loans, but you may have forgotten some of that knowledge along the way. Exit counseling can be a great refresher of some key things you need to know to repay your student loans.
Exit counseling is required for all federal student loan borrowers. Borrowers who received a subsidized, unsubsidized or PLUS loan under the direct loan program must complete exit counseling when they drop below half-time enrollment, leave school or graduate. Private student loan borrowers with no federal loans are not required to complete federal student loan exit counseling but may be required to complete a similar program offered by their lender.
Exit counseling is provided online and typically takes about 20-30 minutes to complete. Like entrance counseling, exit counseling topics include the following: Understand Your Loans, Plan to Repay, Avoid Default and Make Finances a Priority.
With so many competing demands on your time, it can be tempting to view student loan exit counseling as just one more item on your to-do list and rush through the session as quickly as possible. But the information it provides can help prepare you to repay your federal student loans, so you should slow down and be sure you absorb it.
Federal student loan exit counseling is worth your time because it can help you:
- Learn key terms and vocabulary.
- Understand your loan repayment terms and plan options.
- Learn how to avoid default.
- Get financial planning tips.
Learn Key Terms and Vocabulary
Learning how to manage student loan repayment can sometimes feel like speaking a foreign language. There are so many terms that may feel unfamiliar, especially if a student loan is your first financial product. Overlooking an opportunity to familiarize yourself with the related terminology can lead to confusion and frustration down the road, especially if you wait until you need to troubleshoot a problem.
Exit counseling is a chance to brush up on key student loan-related terms and financial vocabulary – like endorser, forbearance and annual percentage rate – that you likely encountered during entrance counseling but may have forgotten. For quick reference, the Federal Student Aid website also maintains a glossary of these terms that you can refer back to later.
Understand Your Loan Repayment Terms and Plan Options
Navigating federal student loan repayment can be complicated. Beyond the standard 10-year repayment plan, the federal student loan program features several additional repayment plans that you can choose from, and it’s important to understand the pros and cons of each when making your selection.
Student loan exit counseling is your opportunity to learn more about these repayment plans and select one that is aligned with your goals. For example, standard repayment is the fastest and most cost-effective way to repay your student loans. Depending on your financial situation, however, you might find that a plan with a smaller monthly payment initially that grows over time as your salary likely increases – known as graduated repayment – is a better fit.
You can take advantage of the opportunity to choose the best repayment plan for yourself by spending some time with the U.S. Department of Education’s online Loan Simulator repayment calculator, which allows you to estimate your monthly payments on each plan.
Learn How to Avoid Default
Exit counseling is also a good time to learn about the options that are available to you as a federal student loan borrower if you ever experience financial hardship that affects your ability to repay your student loans. It’s important to be aware now of the tools in your toolbox so that you can be proactive and address any problems as they arise.[
Fortunately, the federal student loan program offers many options for struggling borrowers, from pausing payments to lowering monthly payment amounts based on your income. Being aware of these tools and using them as needed can help you avoid going into delinquency and then default, which can damage your credit score and affect your future ability to borrow.
Get Financial Planning Tips
Student loan exit counseling can also help you with your personal finances because it covers financial planning and goal setting. It includes tools to help you think about income taxes and how to access tax incentives for student loan repayment, as well as prompts related to building credit and strengthening your credit score.
Following these tips can get you off to a good start repaying your student loans and put you on a path to a healthy financial future.
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Meghan Lustig, Contributor
ABOUT STUDENT LOAN RANGER
Student Loan Ranger helps prospective and current students and recent graduates make sense of borrowing options, student debt and loan repayment. Previously authored by the Financial Counseling Association of America, National Foundation for Credit Counseling and American Student Assistance, the blog is currently authored by Education Finance Council, a national trade association representing nonprofit and state-based higher education finance organizations. EFC’s member organizations have helped more than 2.5 million families plan and pay for college.
Meghan Lustig is the manager of government affairs and member services for Education Finance.