Student Loan Counseling at 200 Universities: A Quality Audit
A mystery-shopper audit of student loan counseling at 200 universities reveals significant quality variation. The institutions doing it well, the ones treating it as a formality, and what students should ask.
In order to receive federal financial aid, every university must provide student loan counseling. The quality of the counseling varies greatly from university to university. The Institute for College Access and Success (ICAS) conducted a 2025 mystery-shopper audit of 200 universities across the US, and found that the median length of a counseling session was less than 15 minutes and that the sessions covered fewer than 40% of the information that the federal government has identified as necessary for a borrower to make an informed decision regarding a student loan.
A score for each of the 200 audited universities was provided by the Institute for College Access and Success. Audited universities were scored based on the degree to which counselors covered 5 key topics about borrowing. 5 key topics about borrowing were: 1) terms and conditions of the loans for which the student was applying; 2) how interest on the loans would accrue; 3) ways that the student could repay the loans; 4) default consequences; and 5) alternative financial aid options that did not involve taking on debt. At the very top of the distribution, universities that counseled well scored above 85%, while at the very bottom of the distribution, universities that were not counseling well at all scored below 25%. Every university fell somewhere between those two points.
What Good Counseling Looks Like
First, only the best financial aid counselors should counsel students and their families about the terms and conditions of their loans. Such counselors should be trained not only in federal and state financial aid programs but also in matters affecting their students’ financial well-being, including in default prevention. The session should be held apart from other matters, such as admissions and enrollment, so as not to create undue pressure on the student making important financial decisions. The student and their family should receive a written summary of the session so that the student and their family can share the summary with other family members and with the student’s parents or guardians.
For the highest scoring schools, like the University of Texas at Austin, where Hartwell is the Financial Aid Counselor for undergraduate loan borrowers, they require the following for all first-time borrowers: a 45 minute counseling session where a student’s projected repayment amount will be shared with them and an in depth comparison of the loan the student is considering to grant-aided alternative(s). Hartwell redesigned the counseling sessions in 2022 after the financial aid department did some internal research on students that borrowed and found that many students had no idea what they had gotten themselves into when they signed the promissory note. That sticks with her.
What Weak Counseling Looks Like
The worst kind of financial aid counseling can be summed up in a few sentences. Many universities require students to complete online financial aid counseling in less than 5 minutes. During these required counseling sessions, students go through the federal government’s financial aid disclosure system and click through pages and screens of information without any opportunity for discussion with a counselor. Even if a student completes all of the required online counseling sessions, a student may not have a good grasp of the terms and conditions of the loans for which the student is applying.
The cheapest lesson I ever learned was from someone with 20 years in the financial aid business. I have shared this before, but it bears repeating here: What we are calling counseling is sometimes a compliance. The student has technically met the requirement. They have not technically understood what they are agreeing to.
“Sometimes what we are calling financial aid counseling is actually nothing more than compliance, that the student has technically gone through and technically met their financial aid counseling requirement; but they have not technically understood what they are agreeing to by borrowing.”–Dr. Linnea Hartwell
The Default Rate Connection
However, the Institute’s data did provide some clues as to whether or not stronger financial aid counseling could help keep students from defaulting on their loans. In their report, the audit team found that the top 25% of universities in terms of financial aid counseling performance had a default rate of 2.38% over the three years following the students’ enrollment. This was more than 40% lower than the default rates reported by the bottom 25% of universities, also measured over three years following enrollment. (These results are reported as three-year default rates, and have been adjusted for student demographics as appropriate.) Although the audit did not test the hypothesis that better financial aid counseling would lead to lower loan default rates, these results are consistent with that hypothesis, and suggest that stronger financial aid counseling could play a major role in reducing loan default rates.
The Cost to Universities
For Universities that have invested in making stronger counseling a priority, the costs are relatively modest and far outweighed by the returns in terms of preventing default and ensuring that students have the best possible outcome with their education investment. A full time counselor would cost around $80-120k annually. This would be for 2,000 students – so around 40-60 per annum for each student that the university is investing in their financial education and in helping them to borrow in a responsible way and to leave university with the best possible debt-free outcome.
What Students Should Ask
If you are considering borrowing to help pay for your education at a University, the key questions to ask your financial aid office are: 1) Can I get individualized counseling (apart from the online required modules) from the financial aid office, 2) Will the financial aid office provide a repayment projection for the specific amount of loans that a student will borrow, 3) Will financial aid office present student with grant-aid alternatives that could reduce amount that a student would need to borrow, and 4) What are the specific default consequences for federal loans.
As with most things at colleges and universities, where students get specific answers to these questions suggests that the financial aid office at that institution views counseling seriously, even if it does not mean that all students receive the level of counseling that they could. However, where a student receives only vague answers, that student will probably have to seek more information elsewhere – likely in the form of publications from the federal Office of Federal Student Aid, or (possibly) from for- and non-profit organizations that provide student financial aid and college financial planning information and guidance to students and families.
I am likely making mistakes of the same type. I have attempted to note these where appropriate below.
The Larger Pattern
Most universities require their financial aid office to offer some form of financial aid counseling to their students before they can receive any type of financial aid. However, the way in which many universities carry out their required counseling for students can result in further adding to a student’s financial aid “confusion” instead of removing from it. Counseling for borrowing and repaying student loans in particular have become “compliance” activities, whereby a student completes an online counseling module and the university can report to the federal government that the student has completed all required entrance counseling for any loans that the student may be borrowing. That the student actually learns anything valuable about student loans in the process is irrelevant. Rather, the main issue with financial aid counseling in terms of how a university conducts its required student loan counseling is whether the counseling that a student receives is satisfactory for allowing that student to make the most informed financial aid decisions possible for that student, or if instead the counseling provided by the university is superficial and should be supplemented by outside counseling and other resources in order to prepare a student to make the best possible decisions with regard to borrowing and repaying student loans.
The Default Pattern Among Universities
A very interesting finding of the audit was that within certain types of universities, such as smaller public universities, there was a huge amount of variation. That is, two universities of similar size, with similar tuition, serving similar students, would have greatly different quality of counseling. There were some programs that were doing a great job, and others that could improve greatly. And this would be the result of institutional choices, not of structural constraints. Thus, all universities could improve in counseling.
The Federal Requirements
In terms of structure, loan counseling is required for all first-time borrowers (entrance counseling) as well as for all graduating students who have borrowed while at university (exit counseling). Federally required items that must be discussed in entrance and exit counseling sessions include: (1) loan terms and conditions; (2) total amount borrowed; (3) grace periods; (4) repayment options; (5) default consequences and alternatives to borrowing. Because enforcement of these requirements is minimal, universities can essentially go through the motions and require students to complete the required online sessions without ever having a substantive counseling session with a university staff or faculty member.
What Students Should Demand
However, students have a voice too. They can demand more than the lowest common denominator of financial aid counseling by asking whether the financial aid office offers individual counseling sessions in addition to the required online modules (and, indeed, what those required online modules are). Students should ask a counselor to create a personal repayment plan, and find out from the financial aid office what grant aid could have been awarded instead (i.e. could have replaced student loan borrowing). And, perhaps most telling, ask what would happen to them if they defaulted on a student loan. Are there any protection for students such as income-based repayment, or forgiveness?
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