Loan counseling is an important part of the loan process, as most students have little or no experience with repayment and managing debt. Federal regulations require that colleges must ensure that students receive entrance and exit loan counseling. Counseling may be done through in-person individual or group training or through the college’s website, other electronic means, written materials or different methods.
At a minimum, schools must provide entrance counseling to first-time Stafford and Federal PLUS graduate borrowers before the first disbursement of a loan can be made, and exit counseling to students before they leave school. Complete information about loan counseling, including required entrance and exit counseling elements, is provided in the FSA Handbook: Volume 2 – School Eligibility and Operations, Chapter 6 – Consumer Information and School Reporting.
Education Loan Information Pilot Program
In a move to build awareness about existing student loan debt and help borrowers be better informed as they make future decisions about paying for college, the Illinois legislature created the Education Loan Information Pilot Program. Beginning with the 2019-20 academic year, and with an expiration of June 1, 2023, the program requires Illinois public universities and community colleges to provide annual notification to students and parents/guardians of the total amount of education loans borrowed to date and estimates of future payments.
For purposes of this program, education loan is defined as “any state or federal education loan or other loan used primarily to finance a postsecondary education and costs of attendance at a public institution of higher learning, including, but not limited to, tuition, fees, books and supplies, room and board, transportation and miscellaneous personal expenses”.
According to the law, and formalized by ISAC Administrative Rules (Part 2700.30(h)(1-2), the elements required to be provided to borrowers include:
- an estimate of the total amount of education loans taken out by the student or parent/guardian;
- an estimate of the total payoff of the loans or a range of the total payoff amount;
- monthly repayment amounts for a borrower based on the total amount borrowed (including principal and interest);
- the percentage of the borrowing limit that has been reached; and
- any financial resources available to the borrower
All information provided to the borrower is to be current at the time it is provided. Although not required, the information may include a statement that the estimates and ranges are general in nature and are not meant as a guarantee or promise of the actual projected amount.
As a means of ensuring awareness of debt amounts for all student loan borrowers, annual education loan information is to be provided to:
- any enrolled student who has ever borrowed a loan for education expenses while attending your college;
- any enrolled student who has ever borrowed a loan for education expenses while attending a previous college (provided the college has the information); and
- any parent or guardian of an enrolled student for whom the college has loan information (separate notifications must be made if a parent or guardian has borrowed on behalf of more than one student).
General Implementation Guidance
To assist colleges with implementation and administration of the program, a Frequently Asked Questions (FAQ’s) document provides detailed guidance and a complete explanation of the data that is expected to be provided and to whom the notification is to be made.
Some of the key points that are addressed in detail in the FAQ’s include:
- All enrolled students who have education loan debt must receive an annual loan notification, even if they are not currently borrowing at your institution.
- Parents and guardians of all enrolled students who may have borrowed education loans at your institution must receive an annual loan notification.
- The annual notification to student borrowers is to provide loan history that is as complete as possible, including loans that may have been obtained while attending other institutions (using data from the National Student Loan Data System).
- The annual notification to parents and guardians only needs to include loan information of which the institution is aware; colleges are not expected to check with other institutions for parent or guardian loan history.
Notification Methods – Sample Templates
Colleges may choose from a number of methods to provide the education loan information. Notification may be made by mailing or sending letter electronically. Other electronic means could include e-mail messages, or providing access to a secure portal where a borrower could log in and obtain the information. There are also resources available by contracting with a third party to provide the loan indebtedness data.
ISAC does not provide an electronic tool or system component for colleges’ use in fulfilling the requirements. However, sample templates that contain all required data elements were designed, and may be utilized as they are or may be customized to better align with the systems and processes of your offices. Separate templates are available for students, parents and guardians. It is not required that ISAC’s templates be used; colleges are free to implement a process that works best for their campuses.
Colleges will likely need to rely on a mix of sources to gain borrower-specific loan information. While data from a college’s own financial aid management system will typically be necessary, a student’s loan history is accessible through the National Student Loan Data System (NSLDS), the centralized national database.
There are no reporting requirements connected with the Education Loan Information Pilot Program; ISAC does not collect any data from colleges. Rather, compliance will be verified through the ISAC Program Review process.