Default rates are a hot item that is being scrutinized by the Department of Education and the media. Any default prevention measures are crucial to controlling or reducing default rates. One prevention tool is entrance and exit counseling for student loan borrowers. Loan counseling may seem a routine procedure that does not have a significant impact on default prevention, but the focus is on all aspects of default prevention and therefore loan counseling is an important component. Loan counseling deficiencies are common compliance audit findings that may have been taken lightly in the past. Repeat findings or failure to take corrective action with respect to loan counseling could be considered to be a lack of administrative capability.
To avoid loan counseling deficiencies a school should consider requiring all student to perform online loan counseling. If in-person loan counseling is conducted, the schools should maintain the loan counseling documentation that is dated and signed by the student. If the loan counseling material is mailed, the school should maintain dated proof of mailing.