Graduate/Professional Exit Loan Counseling

"Graduate/Professional Exit Loan Counseling" submitted by SchoolGrantsfor Editorial Team and last updated on Thursday 21st July 2011

Table of Contents

Federal regulations require that all students who have borrowed from the federal loan programs receive exit loan counseling. Exit loan counseling provides details regarding a borrower’s rights and responsibilities for student loan repayment, deferment options, and loan consolidation benefits. Understand your rights and responsibilities as a borrower (information provided below) and complete your online exit loan counseling: for undergraduates or graduates. You should complete exit loan counseling when you:

Before you leave school or drop below half-time enrollment, you must complete student loan exit counseling. Regular monthly payments begin six months after you graduate, a grace period after you leave school or drop below half- time enrollment. If you received a student loan prior to July 1, 1993, additional factors may constitute eligibility for deferment—a graduate fellowship, parental leave and more.

Your college or university will be notified directly when you have completed the session. Please make sure you print the confirmation page or note your confirmation number for your records.

Agenda or Purpose

Informs students what the presentation will cover. It is designed to explain the options available for repaying your student loan and is required for each federal Stafford loan student borrower to review your rights and responsibilities, repayment options and how to avoid delinquency and default.

Industry Key Players

Provides an overview of loan industry players. Now that you have borrowed a federal Stafford loan, knowing who’s who in the loan process will help you keep in touch with the right people as you work to repay your loan. Here are the key industry players you may need to contact if you need assistance repaying your loan. Ask students to read a different industry player role from the counseling guide. Then, supplement each description with additional information. (For example, lender, guarantor and other industry player contact information.)

Subsidized Stafford Loans

Provides an overview of subsidized Stafford loans. While in school, you may have borrowed one or both types of federal Stafford loan. The type of loans you borrowed will determine how much you owe when you begin repayment. If you borrowed a subsidized Stafford loan, the federal government has been paying the interest on your loans while you have been in school at least half time, and will continue to do so during your grace period and any periods of deferment.

Unsubsidized Stafford Loans

Provides an overview of unsubsidized Stafford loans and loan interest capitalization. An unsubsidized Stafford loan is not need-based. You are responsible for paying the interest that begins accruing when the loan is disbursed. You have the option of paying the interest while in school or having interest capitalize. Capitalization is when the unpaid interest on your student loan is added to the principal, resulting in a higher total loan balance and possibly a higher monthly payment.

Interest Rates and Loan Fees

Explains Stafford loan interest rates and fees. Student loan interest rates are fixed at 6.8 percent for loans disbursed after July 1, 2006. Student loan interest rates are variable for loans disbursed before July 1, 2006 and adjusted annually every July 1, even while in repayment. Federal Stafford loans have an interest rate cap of 8.25 percent. (Insert current interest rate information to customize the slide.)

Federal Stafford loans also carry fees. A fee of up to 2.5 percent may be deducted from the amount borrowed—1 percent for origination from the lender and a 1 percent default fee from the guarantor. Fees are subtracted from the loan before each disbursement, so you will receive a little less than the amount you applied for. For example, if you borrow $1,000, you will receive a disbursement of $975. However, you are still responsible for repaying the entire $1,000 originally borrowed.

Lenders may offer borrower benefits that reduce the interest rate and/or fees. We will cover this later in the presentation. Some lender borrower benefits may also reduce the interest rate on the unsubsidized interest accrual while the student is enrolled in school. Contact your lender for more information.

Grad PLUS Loans

Provides an overview of Grad PLUS loans and loan interest capitalization. A Grad PLUS loan is not need-based. You must meet credit eligibility requirements. Credit will be checked by the lender annually. You must not have adverse credit history. You are considered to have an adverse credit history if you are 90 or more days delinquent on any debt or if, within five years of the date of the credit report, you have been the subject of a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment or write-off.

If you have adverse credit history, you may still receive a Grad PLUS loan if you obtain an endorser who does not have an adverse credit history. An endorser is someone who agrees to repay the loan if you do not repay it.

You are responsible for paying the interest that begins accruing when the loan is disbursed – repayment commences within 60 days after the loan has been fully disbursed. You have the option of paying the interest while in school or having interest capitalize. Capitalization is when the unpaid interest on your student loan is added to the principal, resulting in a higher total loan balance and possibly a higher monthly payment.

There are no set annual or aggregate limits for PLUS loans. You may borrow up to your full cost of attendance, minus any other financial aid you receive (including subsidized loans, unsubsidized loans, scholarships, and certain fellowships).

Only Direct subsidized/unsubsidized loans and federal Stafford loans (subsidized and unsubsidized) made through the Federal Family Education Loan Program (FFELP) count toward the $138,500 aggregate.

You are eligible for a Grad PLUS loan if you have reached the $138,500 Direct/FFELP subsidized/unsubsidized loan aggregate loan limit for graduate/professional students. However, if you have exceeded the $138,500 aggregate, you must either repay the excess loan amount or make satisfactory arrangements to repay it before you can receive any additional federal student aid, including FFELP/Direct Grad PLUS loans.

You cannot use the MPN that was signed for your subsidized/unsubsidized Stafford loans for Grad PLUS loans. You must sign a PLUS master promissory note.

Payment begins 60 days after the last disbursement. Grad PLUS loans are not eligible for a grace period. Payment will commence within 45 days after the end of the in-school deferment. For loans disbursed after 7/1/2008, borrowers may request to defer payment for six months after graduation or less than half time enrollment.

Grad PLUS loans also carry fees. A fee of up to 4 percent may be deducted from the amount borrowed—3 percent for origination from the lender and a 1 percent default fee from the guarantor. Fees are subtracted from the loan before each disbursement, so you will receive a little less than the amount you applied for. For example, if you borrow $1,000, you will receive a disbursement of $960. However, you are still responsible for repaying the entire $1,000 originally borrowed.

Lenders may offer borrower benefits that reduce the interest rate and/or fees. Authority will cover this later in the presentation. Some lenders’ borrower benefits may also reduce the interest rate on the unsubsidized interest accrual while you are enrolled in school. Contact your lender for more information.

The Grace Period

Explains the grace period for federal loans. After you graduate, leave school or drop below half-time enrollment, you are entitled to a six-month grace period if you have taken out subsidized and/or unsubsidized Stafford loans. Whether or not you are required to pay interest during this period depends on your loan type. For subsidized loans, the federal government pays the interest during your grace period. With unsubsidized loans, you are responsible for the interest. Do not forget monthly payments are due the day after your grace period ends.

Grad PLUS loans are not eligible for a grace period. For loans disbursed after 7/1/2008, borrowers may request to defer payment for six months after graduation or less than half time enrollment.

How many of you plan to relocate after graduation? Make sure your lender has your current address. Even if you do not receive a bill from your lender, you are still responsible for the payment.

Deferment and forbearance will be reviewed later to discuss how some borrowers are able to align their Grad PLUS payments with their Stafford payments.

National Student Loan Data System

Explains the availability of federal loan information online. Provide students with the average student loan debt for students at your school or in the same program of study. How many of you know your total student loan debt?

How much did you borrow while you were in school? One way to find out is to contact the financial aid office. Another way is to use the National Student Loan Data System, more commonly known as NSLDS. NSLDS is an online central database for the U.S. Department of Education's student financial aid programs, which contains a history of all your federal loans. (Refer to Web address.)

To access NSLDS, you must have a Personal Identification Number, or PIN. You can request a PIN by going to www.pin.ed.gov. After you successfully submit a request, the U.S. Department of Education will mail your PIN to you, usually within seven to 10 days. If you provide an e-mail address, you will receive an e-mail within three to five days explaining how to retrieve your PIN at a secured Web site. Be sure to keep your PIN confidential.

Loan Repayment Chart

Federal Stafford Loans (subsidized & unsubsidized) and Grad PLUS loans
Interest Rate   6.80%     8.50%  
Total Amount Borrowed Number of Payments Monthly Payment Total Interest Number of Payments Monthly Payment Total Interest
$5,000 120 $58 $1,906 120 $62 $2,439
$10,000 120 $115 $3,810 120 $124 $4,878
$15,000 120 $172 $5,718 120 $186 $7,317
$20,000 120 $230 $7,624 120 $248 $9,757
$25,000 120 $287 $9,530 120 $310 $12,196
$50,000 120 $575 $19,060 120 $620 $24,391
$100,000 120 $1,151 $38,120 120 $1,240 $48,783

Note: Interest rates on federal Stafford loans disbursed after July 1, 2006 are at a fixed 6.80 percent. Grad PLUS loans have a fixed rate of 8.50 percent.

Illustrates sample monthly repayment amounts based on a range of loan amounts. Have students estimate their anticipated monthly payment using the Loan Repayment Chart in their counseling guide.

Estimating your monthly payment is important. This chart illustrates sample monthly payments based on a range of amounts borrowed using a standard repayment plan. (Review chart.) However, your payment may be different depending on the plan you select and the current interest rate.

Standard Repayment Plan

Graduated Repayment Plan

Provides an overview of the graduated repayment plan. Review the graduated repayment plan definition in counseling guide. Your payments start out low (with interest-only payments) and increase over time, with up to 10 years to repay. The Grad PLUS loan has the same repayment, deferment, forbearance and cancellation provisions as the Federal Stafford Loan Program.

Income Sensitive Repayment Plan

Provides an overview of the income-sensitive repayment plan. Review the income-sensitive repayment plan definition in counseling guide.

Your loan payment will be based on the amount of your federal student loan debt and a percentage of your gross monthly income (usually 4 percent to 25 percent) – as your income increases or decreases, so do your payments. Your payment must cover the interest due. The minimum monthly payment must cover interest due (that’s why gross monthly income is different for 6.80 percent example from the 8.50 percent example in chart). Repayment terms will vary based on the percentage you request, your income and the loan amount.

The Grad PLUS loan has the same repayment, deferment, forbearance and cancellation provisions as the Federal Stafford Loan Program.

Extended Repayment Plan

Provides an overview of the extended repayment plan and review extended repayment plan definition in the counseling guide. This plan is available ( The extended plan is for new borrowers who had no outstanding Federal Family Education Loans when they acquired new FFELP loans on or after October 7, 1998) only to borrowers who have more than $30,000 in outstanding federal student loan debt. The payments can be fixed or graduated for up to 25 years.

The Grad PLUS loan has the same repayment, deferment, forbearance and cancellation provisions as the Federal Stafford Loan Program.

Income Based Repayment Plan

Income-Based Repayment (IBR) Plan option became available July 1, 2009. Each year, your monthly payments will be calculated on the basis of your adjusted gross income (AGI, plus your spouse's income if you're married), family size, and the total amount of your Direct Loans. Under the ICR plan you will pay each month the lesser of:

  1. The amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income, or
  2. 20 percent of your monthly discretionary income.

To qualify for the IBR Plan, you must have a partial financial hardship. Under this plan, during any period when you have a partial financial hardship, your required monthly payment amount will not exceed 15 percent of the difference between your adjusted gross income and 150 percent of the Federal Poverty Guideline amount for your family size and state. You are considered to have a partial financial hardship if the amount you would be required to repay on your eligible student loans under a Standard Repayment Plan with a 10-year repayment period is more than the amount you would be required to repay under the IBR Plan. If you repay under this plan and meet certain other requirements over a 25-year period, any remaining balance on your loans may be canceled. PLUS Loans made to parent borrowers, and consolidation loans that repaid parent PLUS Loans, may not be repaid under the IBR Plan. Contact the Direct Loan Servicing Center (for Direct Loans) or your FFEL lender (for FFEL Program loans) for more information about the IBR Plan.

Features of Income-Based Repayment (IBR) Plan

Provides an overview of the income based repayment plan and review the income based repayment plan definition in the Insight or Outlook.

Definition of “partial financial hardship”:

Money Saving Benefits

Provides an overview of repayment incentives. Most lenders offer incentives for responsible repayment behavior. Some lenders offer an interest rate reduction for consecutive, on-time monthly payments or for signing up for automatic payment. Lenders may also offer additional incentives.

You may also benefit from tax credits, such as the Hope and Lifetime Learning credits. Student loan interest may also be deducted. For more information, read EDFUND’s Tax Benefits for Higher Education booklet or visit www.edfund.org or www.irs.gov.

Financial Planning

Provides general information on budgeting and personal financial management. Students will be asked about their favorite online financial planning tools.

Creating a spending plan is important when you leave school. It will help you track where your money is going and ensure you have enough money to make your loan payment. Using an online financial planning tool, like EDWISE, is one way to compare repayment options and find expense-cutting tips. EDWISE provides all this information at your fingertips and is easy to use. (Refer students to www.edwise.org)

Your Rights

Summarizes federal loan borrowers’ rights. As a Stafford loan borrower, you have a number of important rights. When you accept a federal Stafford loan, you have the right to receive a copy of your signed MPN with a disclosure statement. You have the right to a six-month grace period before the first payment of your loan is due and you may prepay all or any part of your unpaid balance on your loan(s) at any time without penalty.

Under certain circumstances, you have the right to deferment and forbearance options. Should ownership of your loan be transferred, you will be notified of the name, address and telephone number of the new lender. Finally, you have the right to receive proof of discharge after you have repaid your loan in full.

Grad PLUS loans are not eligible for a grace period. Payment will commence within 45 days after the end of the in-school deferment.

Your Responsibilities

Summarizes federal loan borrowers’ responsibilities. Accepting a loan means you accept legal and financial responsibilities until your loan is repaid in full. A student loan must be repaid regardless of whether you complete your program or get a job after graduation. You are also obligated to make on-time, monthly payments—even without notice from your lender—and read all correspondence regarding your student loan.

In addition, you must notify your lender within 10 days if you reduce your status to less than half time, withdraw from school, stop attending classes, fail to re-enroll for any term, change your expected graduation date, or change your name, address or telephone number. Finally, shortly before leaving school, you are required to attend exit counseling.

Avoid Delinquency and Default

Provides tips for avoiding the consequences of delinquency and default. It is important to avoid becoming delinquent. One way is to make on-time monthly payments to your lender. A payment received one day late is considered delinquent and a lender may collect a late charge for each late installment. Delinquent payments are also reported to national credit agencies and will damage your credit for years to come. Your school or lender will help you if you have difficulty making your payments.

Deferment

Reviews deferment options. One option for avoiding delinquency and default is deferment. A deferment is a postponement of payments on your student loan. Deferments are not automatic; you must apply for one and receive approval from your lender. Your lender or guarantor can let you know if you are eligible for a deferment. Reasons for a deferment include returning to school at least half time, becoming unemployed or working less than 30 hours a week, economic hardship or military service.

When subsidized loans are deferred, the principal payments are postponed and the federal government pays the interest. When unsubsidized and Grad PLUS loans are deferred, the principal payments are postponed, but you are responsible for paying the accrued interest.

Current regulations state that Grad PLUS loans must enter repayment within 60 days of the loan’s final disbursement. However, Grad PLUS loan borrowers can automatically receive an in-school deferment if they are enrolled at least half time or are enrolled in a graduate fellowship program approved by the U.S. Secretary of Education. Do not forget to request deferments for your Consolidation loans as well.

Economic hardship deferment is often used when law graduates are studying for the bar or medical students are in residency.

The Grad PLUS loan has the same repayment, deferment, forbearance and cancellation provisions as the Federal Stafford Loan Program.

Forbearance

Reviews forbearance options. If you do not qualify for a deferment but are having difficulty repaying your loans, you may be eligible for a forbearance. Forbearance is the temporary reduction or postponement of your monthly payment. Like a deferment, a forbearance is not automatic. You must apply and receive approval from your lender.

You are responsible for paying all accrued interest during the forbearance period. Common reasons for forbearance include poor health, a rigorous residency program or undergoing financial hardship. Remember, a forbearance often results in an extended repayment period which means you will pay more interest on your loan in the long run.

The Grad PLUS loan has the same repayment, deferment, forbearance and cancellation provisions as the Federal Stafford Loan Program.

Federal Loan Consolidation

Reviews loan consolidation. In the future, you may consider loan consolidation which allows you to combine any or all of your outstanding federal student loans into a new single loan. When you consolidate you agree to new terms and conditions with that lender. Federal loan consolidation has an interest rate cap of 8.25%. Although you may have a lower payment, your repayment period may also be extended, costing you more in the long run, and you may be giving up some of your benefits.

Consolidation is not for everyone. Before you choose to consolidate, talk to your lender about your options and get informed. (Refer to Web addresses and EDFUND’s consolidation brochures, I-41 and I-59.)

You may consolidate your Grad PLUS loans with your other federal student loans into a single Consolidation loan after you leave school. Note that the repayment period for a Consolidation loan begins as soon as the loan is made – there is no grace period. Therefore, if you want to consolidate your Grad PLUS loans with your other student loans that have a grace period, you should wait to do so until shortly before the end of the grace period on the other loans.

Consolidation Payment Chart

Example          
Loan Balance No. of Payments Term Length Monthly Payment Total Interest Total Paid (Loan + Interest)
$100,000 120 180 240 300 360 10 years 15 years 20 years 25 years 30 years $1,151     $888     $763     $694     $652 $38,096 $59,783 $83,202 $108,222 $134,693   $138,096    $159,783     $183,202     $208,222     $234,693

Note: Example uses 6.8 percent interest rate, standard repayment plan.

Illustrates how to calculate new monthly payment amount once loans have been consolidated. In this example, a $100,000 Consolidation loan with a 10-year term yields monthly payments of $1,151.

If you extend the repayment term to 20 or 30 years, the monthly payment drops significantly. But the disadvantage of a longer term is that the amount paid in interest can bring the total loan amount to well over $200,000!

And with some of the longer repayment terms, you’ll end up repaying more than double the original loan amount.

The Consolidation loan repayment chart on page 6 of your booklet illustrates monthly payments and total paid amounts for various loan balances under the standard repayment plan with an 8.25 percent interest rate. A lower rate and a different repayment option will yield a different monthly payment amount. (Review FFEL Consolidation Loan Repayment Chart on page 9 of Managing Your Student Loan Portfolio Booklet.)

Loan Forgivenessfor Stafford Loans

Reviews types of loan forgiveness programs available for federal Stafford loans. Review Teacher Loan Forgiveness brochure (I-40.1) with students, if appropriate.

Under certain circumstances, the federal government may cancel all or part of a loan; this is called loan forgiveness. Borrowers may have their federal student loan debt forgiven or assumed for volunteer work, military or teaching service, or practicing medicine in designated communities. In addition, AmeriCorps volunteers can use their education awards to repay their student loans and Peace Corps volunteers may receive financial assistance at a number of universities to pursue graduate study. (Review Web addresses.)

When the Grad PLUS loan program was set up, it was to mirror and be treated like the parent PLUS loan program. Parent PLUS loans do not qualify for the forgiveness programs; therefore, nor do Grad PLUS loans. Until we receive further guidance from the U.S. Department of Education, that is how it stands.

Loan Cancellation

Reviews loan cancellation. A loan may be canceled under extreme extenuating circumstances. (Review bullets.)
For those students with dependents (either a spouse or children), this is a reassuring feature of the federal loan programs. If something happens to you, your estate does not have to pay back your federal student loans.

Yes, Grad PLUS loans are also eligible for loan cancellation under certain circumstances.

The Grad PLUS loan has the same repayment, deferment, forbearance and cancellation provisions as the Federal Stafford Loan Program.

Consequences of Default

Reviews the consequences of default.If you default on your loan, there are serious consequences. (Review bullets expanding.) Select an activity from the Closers & Reviews section of the Building Futures Appendix to revisit important concepts.

Keys to Successful Repayment

Provides the keys for successful repayment. Students will be asked to verbally give you a number between one and 10. When someone in the group has stated a number (seven, for example), then say, “We need seven ways you can avoid default.” Begin by stating the first way. As students give their answers, you keep track of the number and add any information that students miss.

Challenges students

Reinforce key concepts using true or false quiz and expand on concepts covered.

Additional Customization

New HEOA regulations (signed into law on 08/14/2008) required schools to provide entrance and exit counseling to students receiving Perkins loans and/or TEACH grants.

Perkins Loans

Perkins Loan Limits

Academic  Year Annual Loan Limits Cumulative Loan Limits Estimated Monthly Payment on Maximum Estimated Total Payment Amount
Undergraduate $5,500 $27,500 $292 $35,002
Graduate $8,000   $60,000* $636 $76,367

Sign Denotes: *Cumulative is $60,000 for undergraduate and graduate loans combined.

Presents annual Perkins loan borrowing limits. Perkins loans also have loan limits. The annual loan limit is the maximum you may borrow for a single academic year. The amount of Perkins Loan you receive is determined by your school's financial aid office. (Review chart.)
http://ifap.ed.gov/dpcletters/attachments/GEN0812FP0810AttachHEOADCL.pdf page 139-140

Otherwise eligible students may receive the increased loan amounts beginning with any 2008-2009 award year payment period (where the first disbursement is made on or after July 1, 2008) that includes or begins on or after August 14, 2008. In addition to awarding the increased loan limits to students for the current and future payment periods, an any eligible payment period that has ended as long as the student is still enrolled for the 2008-2009 award year.

The new Perkins Loan annual and aggregate loan limits are as follows:

GRADE LEVEL  ANNUAL LOAN LIMIT AGGREGATE LOAN LIMIT
ONE AND TWO $5,500 $11,000
THREE AND ABOVE $5,500   $27,500
GRADUATE  $8,000   $60,000

TEACH Grant

Provides an overview of the TEACH Grant. You must sign an Agreement each year before receiving a TEACH Grant. The Agreement is a legally binding document that defines the teaching service obligations you must meet and specifies your repayment obligation if a TEACH Grant that you receive is converted to a Direct Unsubsidized Loan.

TEACH Grant Limits

Academic  Year Annual Grant Limits Cumulative Grant Limits Estimated Monthly Payment on Maximum* Estimated Total Payment Amount*
Undergraduate & Post -baccalaureate $4,000 $16,000 $184 $22,095
Graduate $4,000   $8,000   $92 $11,048

Sign Denotes: *Estimated monthly payment and total loan pay off based on 6.8% and 10 year term. Assuming all grant converted to Federal Unsubsidized Stafford Direct loan.

Presents TEACH Grant limits. Eligible full-time students may receive $4,000 per year in TEACH Grant funds, up to a maximum of $16,000 for undergraduate and post baccalaureate study, and $8,000 for graduate study. (Review chart.)

TEACH Grant Resources:

Provides an overview of the TEACH Grant. You must sign an Agreement each year before receiving a TEACH Grant. The Agreement is a legally binding document that defines the teaching service obligations you must meet and specifies your repayment obligation if a TEACH Grant that you receive is converted to a Direct Unsubsidized Loan.

PUT Program

Provides an overview of Put loans. The Ensuring Continued Access to Student Loans Act of 2008 (Pub. Law 110-227) (ECASLA), gave the US Education Department temporary authority to buy student loans from lenders that participate in the federal guaranteed loan program. This due to the economy's liquidity problems.

It may be possible that one or some of your loans were sold to the Department of Education during the loan purchase program time frame. Once you enter repayment, you will have to repay your loan(s) to your lender and/or to the Department of Education’s designated servicer. Only Stafford (subsidized or unsubsidized) loans and PLUS loans (parent or graduate/professional student) that are made for the 3 academic years shown on the slide are eligible. Consolidation loans are not eligible.

  1. For academic year 2007/2008, the PUT program closed on 2/25/2009
  2. For academic year 2008-2009, the lenders can sell loans anytime after the loan is fully disbursed until 9/30/2009
  3. For academic year 2009-2010, the lenders can sale loans beginning 06/15/2009 and up until 9/30/20010

Encourage students to check their loan portfolio in NSLDS to identify if their loans are Put loans. Provide contact information for the Department of Education student loan services.

How will you be notified? The Department will send to you a welcome letter showing their Student Loan Servicer’s contact information and balance of your PUT loan. Listed on this slide is the web address and phone number for the Department of Education Student Loan Servicer.

NOTE: In 2009 we hear the Dept may be sending email to borrowers. Please alert borrowers so they are aware of different servicer on PUT Loans as they enter repayment.

Related resources: