How to Work with a Nonprofit Student Loan Counselor

According to the Education Data Initiative’s November report, over 43 million student loan borrowers carry an average debt of $39,351 each. Over the past two years, more than 35 million of these borrowers with federal student loans benefited from the CARES Act of 2020, which provided general debt relief.

The latest analysis from the EDA reveals some troubling trends: one in ten Americans has defaulted on a student loan, 15% of loans are in default at any time, and $124.4 billion of the $1.75 trillion in student loan debt is currently in default.

With extensions to CARES Act relief deadlines and expanded eligibility under changes to the Public Service Loan Forgiveness (PSLF) program, navigating student debt can be overwhelming.

Nonprofit financial counseling agencies are valuable resources that act as independent advocates for borrowers, offering:

• One-on-one guidance to bridge the gap between borrowers and lenders.
• Student loan counseling to help borrowers understand terms, explore repayment options, and find affordable solutions.
• Expert advice for borrowers who are delinquent or in default, ensuring they stay up-to-date with changing policies.

Before engaging a nonprofit student loan counseling agency, keep these tips in mind:

1. Verify the Agency’s Reputation
Check the reputation of the agency before reaching out. Look for certified nonprofit counseling services, such as those accredited by the National Foundation for Credit Counseling (NFCC). Be cautious of loan forgiveness schemes that often target vulnerable borrowers. The Department of Education and the Federal Trade Commission are actively working to combat such scams.

2. Understand the Fee Structure
Most nonprofit student loan counseling agencies offer free services to help consumers understand their loan options. A certified counselor will typically review the borrower’s loans, explore repayment strategies, and develop a personalized plan at no cost. If fees are involved, make sure they’re clearly explained. Fees may vary depending on the level of assistance required, such as help with applications or direct communication with loan servicers. Some agencies may also provide scholarships to cover counseling fees.

3. Review Available Services
Nonprofit counseling agencies should offer a range of services that address a borrower’s complete financial picture, including a credit assessment and repayment strategies for student loans and other debts. A counselor should educate borrowers on available programs, interest reduction strategies, and repayment plans to ensure affordability.

For delinquent or defaulted loans, the agency should provide an in-depth analysis and develop a plan to bring the loans current. Counselors can also assist with tracking updates to loan forgiveness programs, such as the expanded PSLF.

Working with a certified nonprofit financial counseling agency specializing in student loans can help you identify the best debt reduction plan for your situation.