The ED released some details that would allow some colleges to start requiring loan counseling for students as a condition of receiving federal student loans.
Source: Department of Education
Most college students don’t know how to address their student loans. How they work, when repayment starts, interest, the list goes on. Recently, the US Department of Education, or ED, has aimed to fix that. The ED released some details that would allow some colleges to start requiring loan counseling for students as a condition of receiving federal student loans. The new program is covered under the Higher Education Act. It is specifically constructed to put the effects of more loan counseling to a more practical test.
“We’re keen to understand not only whether required loan counseling works but what kind of loan counseling is most effective,” said Under Secretary of Education Ted Mitchell at the National Association of Financial Aid Administrators conference in Washington in July. Which is an important distinction to make. If knowledge is power, they are trying to figure out which knowledge is the most powerful.
College kids will not be required to get counseling when they take out any loans. However, they have to go through another round of counseling when the loans go into repayment after they leave school. Unfortunately, there is no checkup counseling in between which is probably the most important time for counseling. As the years go by it’s important to set money aside for your loans or to make sure you’re on track to be ready for when the loans do hit repayment, not after.
The schools that start ED’s program can choose from three different counseling methods. They can use a counseling tool made by ED or by a third party counseling service, or one developed by the college itself with ED’s approval. Randomly selected groups of student borrowers will participate in the new counseling program and will be compared to a control group of students who receive just the existing entrance and exit counseling.
“Exit counseling reviews a borrower’s rights and responsibilities–for example, emphasizing that they are obligated to repay the debt even if they are dissatisfied with the quality of their education program or don’t get a job as a result,” said Mark Kantrowitz, publisher and executive vice president of strategy and Cappex.com. “They’re also made aware of the options for repaying the debt, such as deferments, forbearance, income-driven repayment program, extended repayment and others.”
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