Cover Story: Graduating Next Month and Used Federal Student Loans? Don’t Be a Turkey, Complete Exit Counseling Today.

December graduates, listen up. You are almost at the finish line. Congratulations! Did you receive federal student loans during your educational studies? If yes, then you must complete exit counseling on www.studentaid.gov.

Exit counseling is not just a federal mandate, it’s a crucial step that all federal student loan borrowers must take. Whether you’re graduating, leaving school, or dropping below half-time enrollment status, this session is designed to ensure you fully understand your student loan obligations. It’s not just a formality; it’s a vital part of your financial journey. The session will also equip you with the knowledge you need to start repaying your loans after the six-month grace period.

During the exit counseling session, loan borrowers will learn about their repayment options and what repayment looks like after their grace period. Depending on your current financial situation, some repayment options are better than others at the outset of loan repayment.

Students can conveniently complete exit counseling on www.studentaid.gov. The Financial Aid Office typically receives an electronic notification within 24 hours after a loan borrower completes exit counseling. In the interim, a financial aid counselor will place an exit counseling hold on the student’s account. This hard hold prevents the student from accessing vital college records like their academic transcript. In addition, the Registrar’s Office will not distribute regalia or mail a student’s diploma until the loan borrower completes exit counseling.

When completing exit counseling, ensure you input the most accurate contact information for yourself. Loan servicers use the loan borrowers’ contact information in the exit counseling session to contact a loan borrower promptly. As foreign as this may sound, it’s crucial to establish a positive relationship with your loan servicer earlier on, as they are your main point of contact during repayment.

Students who receive the following types of federal student loans during their current academic studies must complete exit counseling:

• Subsidized Loans
• Unsubsidized Loans
• Graduate PLUS Loans

Parent PLUS Loan borrowers do not need to complete this mandatory requirement. It’s still essential for those borrowers to contact their loan servicer, as repayment will also kick in on those loans after the student’s six-month grace period.

Exit counseling can range from 20 to 30 minutes, but it can sometimes take longer than that, depending on the content you absorb. A beneficial aspect of this counseling session is reviewing the federal student loan balances and interest for all your loans. Daunting as it may seem, it’s essential to review your loan balances to see which loans you may want to pay off early to reduce your overall level of indebtedness.

Another key component of the exit counseling session is learning about the consequences of default. Defaulting on your federal student loan obligations can have devastating financial implications for a student. Defaulting on federal student loan obligations can significantly harm a borrower’s credit score. Defaults can linger on a person’s credit report for up to seven years. Other consequences to your credit score include impairing your ability to obtain credit for other larger transactions, such as a car note or a mortgage.

Defaulting on your federal student loan obligations can also result in capitalizing your federal student loan. Capitalization causes the accrued interest to tack on to the principal balance, which can further bloat your repayment costs in the future. You may also face collection agency costs.

In extreme cases, the federal government can conduct wage garnishment for defaulted student loan borrowers. Other tools in the federal government’s collection arsenal include seizing a taxpayer’s refund, withholding federal benefits such as Social Security, and even seizing assets.

Indirect costs of federal student loan default include ineligibility for federal student aid, limited repayment options when rehabilitating the defaulted loan, and difficulty financing future educational endeavors.

Interests available to federal student loan borrowers facing financial hardship include deferment and forbearance. Again, federal student loan borrowers must contact their loan servicers to discuss these issues on time before becoming delinquent to their federal student loan obligations.

Interested in loan consolidation? Exit counseling provides information about consolidating your federal student loans to reduce your payments into one simple monthly installment payment. Consolidation may not always be necessary, so talk to a financial advisor to see if that option is worthwhile given your financial situation.

An interactive component of exit counseling focuses on financial planning tips. General financial tips included in the exit counseling session include budgeting, default prevention, and methods to build and maintain a healthy credit score. Although this material is not a full-fledged financial planning session, it’s an essential tool offered to borrowers with hesitations about their financial future.

If you’re feeling overwhelmed or have questions about completing exit counseling, remember that you’re not alone. The Financial Aid Office at your institution is here to help during reasonable operating hours. As per the Department of Education regulatory guidance, they must be available to answer any questions you may have after completing exit counseling. This support is designed to ensure you fully understand the material presented to you, so don’t hesitate to reach out.

This holiday season don’t be a turkey. Instead, be a savvy graduate who completes their mandatory exit counseling session. Whether you choose to do it with the guidance of a seasoned financial aid pro or in the comfort of your bed at 3:00 a.m., the important thing is that you get it done. So, take a bite of that Thanksgiving meal knowing you’ve checked one more task off your list before next month’s graduation.