USA Funds Encourages Exit Counseling for Borrowers Who Consolidated While in School
Submitted by Arnold Trejo, Sandy Holt & John Bautista

Although federal regulations do not require it, USA Funds® advises schools to conduct exit counseling for their students who consolidated Federal Stafford loans prior to leaving school.

Federal regulations require that a school conduct exit counseling for each Stafford-loan borrower before the student ceases at least half-time attendance. When Stafford-loan borrowers have consolidated their loans prior to leaving school—through in-school consolidations—the borrowers no longer have outstanding Stafford loans, and the school no longer is required to provide exit counseling.

Students who consolidated their Stafford loans while in school can benefit from information about their loan-repayment rights and responsibilities, however. Additionally, a default on a consolidation loan can affect the school’s cohort-default rate. For these reasons, USA Funds strongly encourages each school to provide exit counseling for those students who have taken advantage of the in-school consolidation option.

The Deficit Reduction Act of 2005, which President Bush signed into law Feb. 8, prohibits in-school consolidation effective July 1, 2006.