Chapter	2
Direct	Loan	Counseling
Counseling	Overview
First-time	student	borrowers	must	complete	entrance	counseling	before	they	can	receive	the	first	disbursement	of	a
Direct	Loan,	and	all	student	Direct	Loan	borrowers	must	complete	exit	counseling	shortly	before	they	cease	to	be	enrolled
on	at	least	a	half-time	basis.	There	is	a	special	counseling	requirement	for	student	and	parent	Direct	PLUS	Loan	borrowers
who	meet	the	requirements	to	receive	a	Direct	PLUS	Loan	after	having	been	determined	to	have	an	adverse	credit
history.	This	chapter	discusses	the	counseling	requirements	for	Direct	Loan	borrowers	and	associated	school
responsibilities.
Entrance	Counseling
Entrance	counseling	is	required	for	all	first-time	student	Direct	Subsidized	Loan,	Direct	Unsubsidized	Loan,	and	student
Direct	PLUS	Loan	borrowers.	Entrance	counseling	is	not	required	for	parent	Direct	PLUS	Loan	borrowers.
For	this	purpose,	a	first-time	Direct	Subsidized	Loan	or	Direct	Unsubsidized	Loan	borrower	is	someone	who	has	not
received	a	prior	Direct	Subsidized	Loan,	Direct	Unsubsidized	Loan,	Subsidized	Federal	Stafford	Loan,	Unsubsidized	Federal
Stafford	Loan,	or	Federal	Supplemental	Loans	for	Students	(SLS)	Loan.	In	the	case	of	a	graduate	or	professional	student
who	requests	a	Direct	PLUS	Loan,	a	first-time	Direct	PLUS	Loan	borrower	is	someone	who	has	not	received	a	prior	student
Direct	PLUS	Loan	or	student	Federal	PLUS	Loan.	Subsidized	and	Unsubsidized	Federal	Stafford	Loans,	Federal	SLS	Loans,
and	Federal	PLUS	Loans	are	loan	types	that	were	made	under	the	Federal	Family	Education	Loan	(FFEL)	Program	before
the	authority	to	make	new	FFEL	Program	loans	ended	effective	July	1,	2010.
Before	making	the	first	disbursement	of	a	Direct	Subsidized	Loan,	Direct	Unsubsidized	Loan,	or	student	Direct	PLUS	Loan
to	a	first-time	borrower,	you	must	ensure	that	the	student	receives	entrance	counseling.
Entrance	counseling	provides	borrowers	with	comprehensive	information	on	the	terms	and	conditions	of	the	loan	they	are
about	to	receive,	and	their	responsibility	to	repay	the	loan.	This	information	may	be	provided	during	an	in-person
counseling	session,	on	a	separate	written	form	that	the	borrower	signs	and	returns	to	the	school,	or	online	or	by
interactive	electronic	means,	with	the	borrower	acknowledging	receipt	of	the	information.
If	entrance	counseling	is	conducted	online	or	through	interactive	electronic	means,	your	school	must	take	reasonable
steps	to	ensure	that	students	finish	the	counseling,	which	may	include	completing	a	test	of	their	understanding	of	the
terms	and	conditions	of	the	loan.	If	a	standardized,	interactive	electronic	tool	is	used	for	counseling,	you	must	give	the
borrower	any	required	information	that	is	not	addressed	in	the	tool	either	in	person	or	in	a	separate	written	or	electronic
document.
Your	school	must	have	someone	with	expertise	in	the	
Title	IV	programs	reasonably	available	shortly	after	the	counseling
to	answer	students9	questions.	As	an	alternative,	if	students	are	enrolled	in	an	approved	correspondence,	distance
education,	or	study-abroad	program,	they	may	be	provided	with	written	counseling	materials	before	the	loan	is	disbursed.
You	may	not	require	students	to	complete	additional	counseling	beyond	entrance	counseling.	However,	your	entrance
counseling	policy	can	require	more	than	the	minimum	specified	by	the	regulations	as	long	as	the	additional	requirements
are	reasonable	as	to	time,	effort,	and	relevance	to	the	students9	borrowing	and	are	not	administered	in	a	way	that
unreasonably	impedes	students9	ability	to	receive	Direct	Loans	in	a	timely	manner.	For	example,	your	entrance	counseling
can	include	one	or	more	of	the	following:
Extra	information	as	part	of	in-person	individual	or	group	training	or	through	your	website,	other	electronic	means,
written	materials,	or	different	methods;
A	requirement	for	first-time	student	borrowers	to	take	a	test	or	evaluation	of	what	they	learned	in	counseling	(though
you	cannot	establish	a	passing	score	that	they	must	achieve	to	get	a	Direct	Loan);
A	requirement	for	students	to	complete	a	worksheet,	budget,	or	other	exercise	designed	to	improve	financial	literacy
and	understanding	of	the	implications	of	borrowing	(but	you	cannot	require	them	to	justify	the	need	for	a	loan);	or
A	requirement	for	students	to	participate	in	a	workshop,	loan	orientation	presentation,	or	similar	activity.
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