How Does Student Loan Exit Counseling Work 

As a new college graduate, you may have questions about what your financial future holds. One financial topic that often concerns graduates is understanding their student loans and how repayment will impact their budget.

Student loan exit counseling can help graduates navigate the repayment process. Here's what you need to know about online exit counseling and how you can make the most of this course.

What is student loan exit counseling?

Student loan exit counseling is an online program offered by StudentLoans.gov. This program provides crucial information that helps you prepare to repay your federal student loans. The U.S. Department of Education requires students who have subsidized loans, unsubsidized loans, or PLUS loans under the Federal Direct Loan Program or Federal Family Education Loan Program (FFEL) to complete this course each time they drop below half-time enrollment, graduate, or leave school.

Note: If you only have private student loans, you don't need to participate in the course.

Graduates must complete the process in one session. The entire exit counseling session should take between 20 to 30 minutes. Here is the step-by-step process to complete the counseling process:

Step 1: Understanding your loans

To begin your counseling process, you’ll need to review the basic information of your loans. You'll start by looking over your federal student aid loan balance. Next, you'll discover how student loans work and learn about interest and other important terms that apply to the repayment process.

This section of your counseling will also cover the different types of Direct Loans. You'll learn about Direct subsidized, unsubsidized, and PLUS Loans, as well as federal Perkins Loans.

Step 2: Make a plan for repayment

Once you’ve read over the information about your federal student loans, you can move on to the repayment section. You’ll start by entering your anticipated expenses to determine what your budget will look like when you enter the real world. By creating a budget, you’ll get a better idea of the payment you can afford.

In this section, you’ll also review options for repaying your federal student loans. Some of your choices may include income-based repayment and pay-as-you-earn plans. You can use the repayment calculator to estimate how much you’ll pay with each plan. This calculator takes into consideration your income and expenses to determine the best plan for your needs. Keep in mind, not all options are available for all student loan borrowers.

There's also an interest savings calculator that estimates how much you can save by paying interest during your grace period. While you may not be required to begin making payments right after you graduate, it's helpful to start as soon as possible. The earlier you start repaying your student loans, the less interest you’ll pay over time.

The last subset of this section offers extra repayment tips. For example, if you sign up for automatic payments, you can reduce your interest rate by 0.25%.

The repayment section gives borrowers some of the most useful information they’ll find throughout this course. Thoroughly reviewing the information will help you decide what repayment option is best for your financial situation.

Step 3: How to avoid default

The third section of exit counseling will cover how to avoid default. It will also explain your options if you experience a financial emergency or hardship. For instance, if you're unable to make your monthly payments, you may want to consider forbearance or deferment instead of facing the consequences of not making your student loan repayments.

Keep in mind that if you pause your repayment, you'll still accrue interest. The deferment and forbearance calculators can help you determine how much it will cost you to pause your payments.

Additionally, this stage of exit counseling covers loan forgiveness, cancellation, and discharge. These relief programs include Teacher Loan Forgiveness, Public Service Loan Forgiveness, and School Related Discharge.

In this section, you'll also learn about loan consolidation. While loan consolidation doesn't reduce your interest, it can simplify the repayment process by combining all of your federal student loans into one.

Step 4: Plan for your future

In the fourth section of exit counseling, you'll cover the importance of financial planning and how to set realistic goals for your future. You'll also address financial topics, including creating an emergency fund, building credit, and borrowing.

The information in this section provides a general overview of money management, and encourages participants to adopt healthy spending — and saving — habits.

Step 5: Update your information and select a repayment plan

In the last section of exit counseling, you’ll update your personal information. This includes your new employment information if you have a job. You'll also provide two references, so that if you default on your loans, they have alternative points of contact to reach you.

At this time, you'll use what you learned throughout the course to select a repayment plan. It's important to note that another repayment option not mentioned in the course is refinancing with a private lender. Refinancing is the process of replacing your current loans with an alternative loan. Borrowers who refinance seek a lower interest rate and better terms.

However, when you refinance, you relinquish any benefits of your federal loans, such as loan forgiveness and income-driven repayment, and replace those with the benefits of your new private loan.

After you select a repayment option and finish this section, you’ll have completed exit counseling and can begin the repayment process.

Be sure to explore all of your student loan repayment options

While student loan exit counseling provides a lot of valuable information for beginning your student loan repayment process, it doesn't cover everything you need to know. As mentioned above, this course doesn't touch on other repayment options or other ways to potentially help you save money, such as refinancing.

Ready to start repaying your student loans on your terms?

Want to make your student loan payments without putting the rest of your life on hold? You may want to consider refinancing your existing loans. To learn more about the Citizens Education Refinance Loan^® and the benefits of refinancing¹, call 1-877-405-2262 to speak with one of our Student Lending Specialists.