College Entrance Loan Counseling

By Joe Messinger, CFP®

June 23, 2022

2 min READ

If federal student loans are part of the plan to pay for college (and for most students they are!), college entrance loan counseling will also be on the “to-do” list for students heading to college.

Years ago, students were expected to read the paperwork about their loans and were responsible for understanding the details. (We’re pretty sure that didn’t happen.)

Today’s federal government now has a website to walk students through what all those terms mean and what they can expect in the future with their loans. 

Who needs to complete this counseling?

Those required to complete the entrance loan counseling include:

• Undergraduates taking out Direct Subsidized Loans and Direct Unsubsidized Loans
• Graduate or professional students taking out Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans
• Some colleges have their own alternative counseling

Only those who have not completed the counseling before need to participate. The website says it will take 20 to 30 minutes to complete. Students need their financial aid offer, breakdown of tuition and fees, college name, and a verified StudentAid.gov account.

Understanding Your Loans

Throughout the website, you find lots of handy diagrams and explanations. Loan and financial terminology can be confusing–even for adults. So, having students walk through this will help them understand how borrowing money works.

In the demo, you can fill in anticipated loan figures, and learn more about repayment. The demo reviews the following topics:

1. Estimating the cost of your education.
2. Paying for your education.
3. Federal student loans.
4. How much you can expect to borrow.
5. Preparing for repayment after school.
6. What happens if you can’t or don’t repay your loans.

You’ll notice many reminders throughout the demo about common sense borrowing. The purpose of this is to counsel students after all to hopefully not make bad decisions–don’t borrow more than you need.

Next is a review of loan basics including how loans work (see graphic) as well as teaching terms like “interest accrual” and “capitalized interest.”

This section wraps with a look at where the money to pay for college comes from, the types of federal loans, and important information to know about the federal loan limits you are allowed to borrow each year.

Prepare for Repayment After School

This section deals with life after college, including:

1. Who you pay.
2. Your repayment responsibilities.
3. Choosing a repayment plan.
4. Understanding the “why” behind repayment, and consequences if you fail to pay.

This section wraps with a walkthrough of repayment (when do you start making payments, what if I pay off my loan early) and navigating repayment (who do I make payments to, how do I change my repayment plan).

Finances: A Priority

Student loan entrance counseling is a great starting place for college graduates to better understand that the financial decisions they make now impact them for years to come. If you’re looking for additional educational resources for your student, StudentAid.gov has a number of free resources about how financial aid works, and what students can expect.

All in all a great tool!

Let’s face it — Students know almost nothing about credit, borrowing, and how it all works. Walking through this college entrance loan counseling is a great way for them to get their feet wet with all the jargon and to understand the impact of borrowing on their future.

Updated: June 2022