JB Pritzker, Governor, State of Illinois

Loan Counseling

Loan counseling is an important part of the loan process, as most students have little or no experience with repayment and managing debt. Schools must ensure that students receive entrance and exit loan counseling. The loan counseling may also be provided to borrowers by a consultant, servicer, lender or guarantor. The school is responsible for making knowledgeable staff available to answer student questions concerning financial aid programs.

Although schools are responsible for conducting both entrance and exit counseling, lenders are an integral partner in educating students of their rights and responsibilities regarding student loans. The school is responsible for conducting an entrance interview prior to the first disbursement. As a student matriculates from undergraduate to graduate school, entrance counseling is again required. Although no other counseling is required until the student separates or drops below half-time student status, it is important for lenders to keep in contact with their borrowers. If students are aware of whom their lenders are, the incidence of loan default is less.

At a minimum, schools must provide entrance counseling to first-time Federal 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. If the counseling is given electronically, schools must make sure that the student receives written counseling materials for any required information that is not provided in the electronic counseling presentation. Many schools utilize Mapping Your Future’s online student loan counseling option to meet federal requirements for loan counseling, via the internet and interactive sessions.

Schools have the opportunity at each disbursement to remind students about the importance of academic progress, planning for future employment, and staying in touch with the holder of the loan.

It is important for students to understand their rights and responsibilities as they pertain to their student loans. Exit counseling provides lenders with the opportunity to make sure students are clear about this. Working in conjunction with their schools, lenders must advise students of the terms and conditions of the loans including either actual amounts borrowed and the monthly payment, or estimated loan amounts based on school averages.

A critical component of managing cohort default rates is communicating with the borrower, and loan counseling provides a unique opportunity to engage the borrower in a positive manner. 

An entrance counseling checklist and an exit-counseling checklist are available for schools to provide to students as reminders of the loan terms and conditions that should be covered during these sessions. The checklists also provide a useful guide for lender counseling.