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Paying off student loans is like maneuvering through an endless obstacle course. With so many repayment options — standard plans, extended plans, income-based plans — it can be hard to know if you’re taking advantage of the best plan for your situation.
An entire industry has sprung up in recent years under the guise of helping student loan borrowers manage their loans — for a fee, of course.
Among the many services that promise to help you manage your student loan repayment, the counseling offered by nonprofit credit counseling agencies is among the most trustworthy and affordable.
While you can do everything a student loan counselor would do yourself — review your student loans, contact issuers, potentially apply for a new repayment plan — a counseling session can help you work through your situation if you’re feeling overwhelmed or falling behind.
What it is
Student loan counseling by nonprofit credit counseling agencies focuses on giving you the knowledge and tools to understand your loans and figure out the best way to pay them back.
There are generally two tiers:
The first and most common is a deep dive into your student loan debt and your financial situation. The counselor will craft a plan with you to optimize your repayment plan, whether that means consolidating your loans, applying for student loan forgiveness, getting out of default or even pursuing bankruptcy forgiveness for your student loans. Then you will execute that plan on your own.
The second tier involves a more hands-on approach by the credit counselor. In addition to an analysis of your situation, the credit counselor will help you get on the student loan repayment plan that’s best for you. This can mean joining you on a call with your student loan issuer to help guide the conversation or walking you through forms you need to fill out.
“The bottom line with student loans is that we’re usually talking about a large amount of debt,” says student loan counselor Kathryn Bossler from GreenPath Financial Wellness, a nonprofit credit counseling agency. “It can help to have a trained professional to look over your loans to make sure you are paying them back in the way that makes most sense for your financial situation and as efficiently as you can.”
How you’ll do it
Most student loan counseling sessions take place over the phone.
Search online to find a few qualified nonprofit credit counseling agencies that offer student loan counseling. Before you choose one, vet each counselor to be sure you’d feel comfortable working with her or him.
Have documents about your income, expenses and student loans gathered before going into your counseling session to save time.
What it costs
Most agencies charge $50 for the first tier of student loan counseling.
The second tier, however, can get expensive. Some agencies, like ClearPoint, charge a flat rate of around $250 for their hands-on approach. Others, like GreenPath, charge $50 per student loan issuer they contact and may have a cap on the fee (GreenPath’s cap is $600).
As with any service, be sure to get the prices in writing before agreeing to a session of student loan counseling.
Whom it’s right for
“Figuring out the best solution and path for a borrower is challenging, and there are some who will need assistance doing that. The question is how do you do that in a nonpredatory way,” says Persis Yu, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center. “The amount that’s being paid needs to be proportionate to what’s being provided. In my mind, that’s what makes something legitimate — is the fee reasonably tied to what is being provided?”
To determine if student loan counseling is right for you, think about whether you feel comfortable with and capable of assessing your student loan repayment possibilities. If so, reach out to your issuer; it has the responsibility to talk through your options with you, at no cost.
If you think you need some help, the first tier of counseling can give you a deeper understanding of your student loans and the tools to help you optimize your repayment plan. After your counseling session, reflect on whether you feel comfortable taking the initiative on your student loan repayment.
If you do, go ahead and enact the plan. Otherwise, reach out to your student loan counselor again to talk about your options for the second tier of counseling. This more in-depth form of student loan counseling could be useful if you want help working with your loan issuer or filling out forms. Again, before you commit to this, get all fees in writing.
There is no one-size-fits-all answer as to whether student loan counseling from a nonprofit credit counseling agency is right for you. But if you're feeling overwhelmed and want help, a counseling session could be the first step toward getting your loan repayment plan in order.