What Is Student Loan Counseling?

Student loan repayment can be anything but straightforward. You have to find the right repayment plan for your needs, set up your budget to afford your monthly payments, learn to navigate your loan servicer’s expectations, and maybe even figure out how to stay on track to qualify for loan forgiveness or other relief.

Student loan counseling can help you make sense of all these issues and get you on track to successfully repay your loans. Here’s what you need to know to help you decide if student loan counseling is right for you.

What is student loan counseling?

Student loan counseling is a service that helps federal and private student loan borrowers understand the terms, conditions, requirements, and regulations that govern their loans. There are several different types of counseling you may benefit from. 

If you’re a federal student loan borrower, you’re required to complete free student loan counseling online. These mandatory sessions are called entrance counseling and exit counseling.

Entrance counseling

The U.S. Department of Education requires entrance counseling for all federal student loan borrowers who are taking out a Direct Subsidized or Unsubsidized Loan for the first time. You must complete the counseling before the Department of Education will release your loan money. Entrance counseling covers the following information:

• What a loan is
• How interest works and how it will affect your loan
• Your repayment options
• How to avoid delinquency and default
• Your rights and responsibilities

Exit counseling

Federal student loan borrowers are also required to complete a 30-minute exit counseling session upon graduating, leaving school, or dropping below half-time enrollment. Exit counseling helps borrowers understand their debt obligations so that they are prepared to begin repayment. You’ll learn:

• Who your loan servicer will be
• When your repayment period begins
• Your repayment options, including a recommendation of the best plan for your situation
• What loan consolidation is
• What loan refinancing is and how it affects federal student loans
• How loan forgiveness works
• How to budget for student loan payments

Other counseling services

In addition to the required federal loan counseling, borrowers may also be interested in third-party counseling services from a nonprofit or private company. This isn’t required by any lender, but it can help struggling borrowers get on track with repayment. 

This type of student loan counseling works similarly to credit counseling. You work with a counselor who can review your financial situation, help you determine your options, and create a repayment plan that works with your budget.

Benefits of student loan counseling

There are a number of potential benefits of student loan counseling, especially for borrowers who feel overwhelmed. A student loan counselor can help you:

• Figure out your loan repayment status: If you lost contact with your loan servicer or missed a payment or two, your counselor can help you reconnect and put together a full picture of your student loan obligations.
• Identify repayment challenges: Your counselor can help you determine what made it difficult for you to keep up with your monthly payments, and how you can fix it for the future. 
• Suggest solutions: You’re likely seeking counseling because you’re struggling with your debt. Your counselor will help you find available solutions and put them in place.
• Create a repayment plan: You and your counselor can create a plan for consistent repayment. This may include helping you find the necessary forms to request a change to your repayment plan, working with you to make a budget, and suggesting other improvements you can make to your financial situation.

Check Out: How To Get Student Loan Repayment Help

What to ask before hiring a counselor

Not every counselor has your best interests at heart, and student loan scammers sometimes promise debt relief to desperate borrowers. Before agreeing to work with a student loan counselor, ask questions and research the company. Don’t enter into contract with a counselor who waves away your questions or is unwilling to answer them.

1. What are the counselor's certifications? 

A legitimate student loan counselor will usually have certification or accreditation in student loan counseling or personal financial wellness consulting from one of the following organizations:

• National Financial Educators Council (NFEC)
• National Association of Certified Credit Counselors (NACCC)
• Financial Counseling Association of America (FCAA)
• Certified Student Loan Professionals (CSLP)

Student loan counselors may also have additional certifications. For example, you may be working with an accredited financial counselor (AFC) or a certified financial planner (CFP). Make sure you find out any prospective counselor’s certifications and areas of expertise before hiring them.

2. How can the counselor assist with loan repayment?

A counselor should offer to help you with things that you are struggling with. For example, your counselor might help you organize your loan information or break down your repayment options. A counselor’s goal is to help and empower you to take control of your student loan repayment.

Borrowers should be wary of counselors who offer to do things for you. For instance, you might meet a counselor who offers to file the federal Direct Consolidation Loan application for you — but for a price. This is something you can do yourself for free. 

3. What fees will I pay? 

The cost for student loan counseling varies from one organization to the next. You can expect to pay a fee for in-depth counseling, although some programs offer a free initial consultation.

Nonprofit organizations generally offer counseling services for a lower cost than for-profit agencies. Here are the costs for three student loan counseling programs:

Make sure you understand what fees you may pay before hiring any student loan counselor.

4. What’s the reputation of the counseling service? 

There are a number of ways to check the reputation of a counseling service. If you’re working with an accredited or certified counselor, start with the agency that certified them:

• National Financial Educators Council (NFEC) provides a certification database where you can verify a counselor’s certification and report misconduct.
• The U.S. Department of Justice maintains a database of approved credit counseling agencies by state. These agencies will have National Association of Certified Credit Counselors (NACCC) certification.
• The Financial Counseling Association of America (FCAA) offers a search tool for finding a local counseling agency.
• Certified Student Loan Professionals (CSLP) has a searchable directory of advisors on its website.

In addition to checking with the certifying agency, you may also want to check to see if your counselor has an affiliation with the National Foundation for Credit Counseling (NFCC). 

Is student loan counseling right for you?

Not all borrowers need help from a student loan counselor, even if they feel like they have gotten in over their heads. Before turning to third-party student loan counseling, try these resources first. They are free and may solve your issue without counseling:

• Your loan servicer: Most loan servicers offer free advice and suggestions to borrowers who need help. Some lenders may even have counselors on staff who can help you figure out your repayment plan as a free service.
• The Federal Student Aid help center: If you’re a federal student loan borrower, you can contact an FSA representative for assistance. 
• Your school’s financial aid office: The financial aid office at your alma mater may be able to help you navigate your student loan repayment and answer any questions you may have about your loans.
• Your student loan ombudsman: An ombudsman is a state or government official who helps resolve disputes. If you are unable to resolve an issue with your loan servicer, you may want to get in touch with your state’s student loan ombudsman.