Final regulations published Nov. 1 permit — but do not require — early implementation of the Grad PLUS entrance-counseling requirements included in those regulations.

Previously, federal regulations required that schools provide entrance counseling only for first-time Stafford-loan borrowers. Graduate and professional students became eligible for PLUS loans beginning in 2006, however, and those loans have provisions that differ significantly from those of Stafford loans.

To address first-time borrowers of Grad PLUS loans, the U.S. Department of Education specified the following entrance-counseling rules in its recently issued final regulations:

• The school must ensure that counseling is conducted with each graduate or professional student who is obtaining a PLUS loan, unless the student previously has received a Federal PLUS or Direct PLUS loan.
• The student must complete counseling prior to the delivery of the loan’s first disbursement.
• Counseling must inform the Grad PLUS borrower of sample monthly payment amounts based on a range of student indebtedness of graduate and/or professional students at the school or in that program of study, or of student-borrowers with both Stafford and PLUS loans — depending on the types of loans the borrower has obtained at the same school or in the same program of study at that school.
• For a graduate or professional student who has not received Stafford loans previously, counseling also must include key elements of the Stafford entrance-counseling requirements, including the following:
  • Explaining the use of the Master Promissory Note.
  • Emphasizing the importance of repaying the loan.
  • Describing the consequences of default, including adverse credit reports, federal tax offset and litigation.
  • Emphasizing the fact that the student is obligated to repay the loan even if the student does not complete the program of study, is unable to obtain employment, or is otherwise dissatisfied with the educational services the school provides.

Schools must implement entrance counseling for Grad PLUS students no later than July 1, 2008.

USA Funds® believes in providing timely, clear information to student-borrowers to help them understand their obligations regarding Federal Family Education Loan Program loans, and to help them avoid the consequences of default. For this reason USA Funds policy advisers encourage schools to provide entrance counseling to Grad PLUS-loan borrowers as soon as possible to ensure their understanding of their repayment obligations and the differences in the various loans they may have.

Counseling assistance available

Mapping Your Future, an award-winning initiative sponsored by a group of FFELP guarantors, can assist you in offering entrance counseling for Grad PLUS-loan borrowers. Additionally, USA Funds is developing a graduate-and-professional-student component of its USA Funds Loan Counselor“ online-counseling tool. USA Funds Loan Counselor’s graduate-and-professional-student component, which will include Grad-PLUS counseling, is scheduled for release in spring 2008.