Guide to Student Loan Exit Counseling

Q: Who needs to complete exit counseling?

Federal student loan borrowers are required to complete exit counseling whenever they graduate, leave school, or drop below half-time enrollment. The purpose of exit loan counseling is to educate students about their responsibility to repay federal student loans.

Q: Do I need to complete exit counseling when going to grad school?

If you’ve financed your undergraduate education with federal student loans, you may need to complete exit counseling to prevent your school from withholding your diploma or academic transcripts. It can be difficult if not impossible to get accepted into a graduate school program if you can’t provide the grad school with copies of your undergraduate transcripts.

Sulaiman Abdur-RahmanUpdated August 2, 2023

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Colleges must provide exit counseling whenever a federal student loan borrower graduates, leaves school, or drops below half-time enrollment. The purpose of exit loan counseling is to educate students about their responsibility to repay federal student loans. Student loan exit counseling is required by federal law under Title IV of the Higher Education Act of 1965 as amended. Below we explain how loan exit counseling works.

What Is Student Loan Exit Counseling?

Student loan exit counseling is an educational session that a federal student loan borrower must complete upon graduating, leaving school, or dropping below half-time enrollment. Under federal law and regulations, postsecondary educational institutions are generally required to provide exit counseling as an in-person audiovisual presentation or by interactive electronic means.Loan exit counseling can help you understand your federal education debt burden and your options for repaying student loans. Colleges may withhold your diploma or academic transcripts if you fail to complete the mandatory exit loan counseling.

Finding Student Loan Exit Counseling

It’s your school’s responsibility to provide you with student loan exit counseling, and you may want to complete the process for the following reasons:

It may provide you with a comprehensive understanding of your federal student loan repayment responsibilities
Your school may withhold your diploma or academic transcripts if you fail to complete exit counseling

Your school may provide you with instructions for completing the mandatory student loan exit counseling online. Colleges in some cases may provide you with written counseling materials via postal mail or email.The school must take reasonable steps and document its actions to comply with the federal government’s exit counseling mandate. Such documentation may detail what the school does to provide exit counseling to each and every federal student loan borrower who needs to complete the session.

How Does Student Loan Exit Counseling Work?

Schools provide exit loan counseling to federal student loan borrowers as required by federal law. The way this works is your school may reach out and give you the opportunity to complete an exit counseling session online or in person.The U.S. Department of Education has an online exit counseling tool, and schools may require that you complete your exit counseling through StudentAid.gov.Schools may ask that you complete the exit counseling shortly before you graduate. If you leave school without graduating or drop below half-time enrollment, the school may contact you afterward and ask that you complete the mandatory exit counseling.

How Long Does Student Loan Exit Counseling Take?

You must finish exit counseling in one sitting. The amount of time it takes can vary depending on how fast you provide information and answer questions. The exit counseling covers significant ground on topics such as interest capitalization and the consequences of delinquency. It may take you up to 30 minutes or longer to complete the exit counseling.

Completing Exit Counseling

As mentioned above, it may take you 30 minutes or longer to complete student loan exit counseling. You may be required to complete the exit counseling shortly before you graduate. The school may withhold your diploma or academic transcripts if you fail to complete the counseling.Federal student loan borrowers who drop out of school or who drop below half-time enrollment are also required to complete exit counseling in due time.

Is Student Loan Exit Counseling Required?

Yes, student loan exit counseling is required if you’ve borrowed federal education loans. Federal law requires that your school provide you with exit counseling if you’ve borrowed funds from the federal government’s Direct Loan program or the discontinued Federal Family Education Loan program.

What Happens If I Don’t Complete Exit Counseling?

As mentioned earlier, the school may withhold your diploma or academic transcripts if you fail to complete the mandatory exit counseling. Schools may warn you about the potential consequences if you fail to act.

What Happens After I Complete Exit Counseling?

Congratulations, you can breathe a sigh of relief after completing your exit counseling. The school will document your completion, and the school may honor your request if you ask for copies of your academic transcripts.

The Importance of Student Loan Exit Counseling

If you’ve borrowed money to attend college, student loan exit counseling can help you understand your rights and responsibilities as a borrower. It’s important to understand your obligations as a federal student loan borrower, particularly because it’s part of your credit history.Borrowers are generally expected to repay their education loans over time. The average student loan debt across the United States is more than $30,000 per borrower, according to the Education Data Initiative. Cumulative federal student loan debt among 43 million borrowers exceeds $1.6 trillion as of 2023, data show.The average time to pay off student loans can range from 10 to 30 years for borrowers with federal student loans and five to 25 years for borrowers with private student loans.Exit counseling can help prepare you for what to expect once you’re required to begin making repayments toward principal and interest charges.

Student Loan Repayment Options

The U.S. Department of Education offers the following four income-driven repayment (IDR) plans to help borrowers pay down their federal student loan debt:

Saving on a Valuable Education (SAVE) Plan, which replaces the Revised Pay As You Earn (REPAYE) Plan

Pay As You Earn (PAYE)

Income-Contingent Repayment (ICR)

Income-Based Repayment (IBR)

Private student loans are not eligible for any federal repayment options, including IDR plans. Depending on your income and family size, all four IDR plans may offer a lower monthly payment compared with the Standard Repayment Plan.All IDR plans can end with a borrower’s outstanding balance being forgiven at the end of the repayment period. Forgiveness may come after 20 or 25 years under any of the IDR plans, but forgiveness may come earlier for some SAVE Plan enrollees. Borrowers with original principal balances of $12,000 or less may be eligible for forgiveness of any remaining balance after making 10 years of payments under the SAVE Plan, according to the Federal Student Aid Office.Your student debt burden may include federal and private student loans. You may calculate student loan debt by finding the account balance for each of your active student loans and adding up the numbers. This can give you a full picture of how much student debt you’re carrying in total.Student loan refinancing can reshape your existing student debt burden. Refinancing federal student loans may be right for you if you can lock in a lower interest rate, but there are some pros and cons of student loan refinancing to consider:

The portion of your federal student debt that you refinance loses its eligibility for Public Service Loan Forgiveness, Teacher Loan Forgiveness, and federal IDR plans
It can be difficult to refinance student loans with bad credit
The credit score needed to refinance student loans is generally 670 or higher
You may refinance student loans with a cosigner when shopping around for refi loans

Recommended: Should I Refinance My Student Loans?

The Takeaway

Unless you’ve bankrolled your way through college or received a full-ride scholarship, you may find yourself needing to complete exit counseling as a federal student loan borrower. Exit counseling can help students understand their federal student loan repayment obligations. You may consider student loan refinancing with a private lender to reshape your education debt burden.Lantern by SoFi can help you compare student loan refinance rates. Refinancing might be right for you if you can lock in a lower interest rate.Compare student loan refinance rates without impacting your credit score.*

Frequently Asked Questions

Who needs to complete exit counseling?

What happens if you don’t complete exit counseling?

Do I need to complete exit counseling when going to grad school?

Photo credit: iStock/nirat

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About the Author

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman writes about personal loans, auto loans, student loans, and other personal finance topics for Lantern. He’s the recipient of more than 10 journalism awards and served as a New Jersey Society of Professional Journalists board member. An alumnus of the Philadelphia-based Temple University, Abdur-Rahman is a strong advocate of the First Amendment and freedom of speech.

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