Use effective loan counseling

Federal regulations (34 CFR 682.604, 34 CFR 685.304, 34 CFR 668.165, and 34 CFR 668 Subpart D) require schools to ensure students do initial (entrance) and exit counseling for many loan types. You can meet these requirements AND ensure students understand their rights and responsibilities if you use effective loan counseling.

Content

In addition to content that meets regulations, the U.S. Department of Education recommends loan counseling include the following:

• Request borrower information:
  • Obtain contact information about references and family members beyond those requested on the loan application.
  • Ask for the borrower’s cell phone number and e-mail address.
• Information about repaying the loan:
  • Estimated balance of debt when the borrower completes the program.
  • Interest rate on the loans.
  • Name, address and telephone number for the lender.
  • Sample loan repayment schedule based on total indebtedness.
  • Estimated monthly income the borrower can reasonably expect to receive in his or her first year of employment based on the education received at your school.
  • Estimated date of the borrower’s first scheduled payment.
• Reminders about personal financial management and title IV loans:
  • Provide financial literacy resources to borrowers at enrollment, throughout attendance, and following graduation or withdrawal.
  • Students should borrow only what they need and can cancel or return any funds in excess of what they need.
  • If a borrower is unable to make a payment, contact the lender before the payment due date to discuss a change in repayment plan or other repayment options.

Frequency

Require students to do entrance counseling each year they will borrow or for each new loan they request. Repetition enforces the lesson, and by using a different format each session (group, online, video), you better capture the student’s attention.

Method

Most experts find that one-on-one loan counseling for students is the most effective; however, this is challenging for most postsecondary schools. Fortunately, regulations also allow you to provide counseling by audiovisual presentation or by interactive electronic means.

If you are doing group counseling or using electronic means (such as online counseling), consider these suggestions for making the counseling more effective:

• Ensure the session or electronic counseling is interactive. It’s easy for students to nod off or spend more time texting or using the Internet in a group session. Try a smaller group size where you can maintain eye contact with each participant, and ask questions or have them do group activities to keep their attention.
• Add a test component to ensure students understood the content. Most online counseling sessions offer a test component. You can create your own for group counseling.
• Customize the counseling so you provide school- and borrower-specific information. Talking in general terms about student loans is okay in some occasions, but if you customize counseling, you make it subjective for students.
• Provide detailed loan data to borrowers.

Explore your options.