Financial Counseling Certification Program (FiCEP) Practice Exam

What should counselors explore when addressing student loans with clients?

1. The potential for loan forgiveness

2. The consequences of defaulting

3. Both A and B

4. New interest rates for refinancing

The correct answer is: Both A and B

When addressing student loans with clients, it is essential for counselors to explore both the potential for loan forgiveness and the consequences of defaulting. Understanding the potential for loan forgiveness is critical because many borrowers may qualify for various programs that can alleviate their student loan burden, such as income-driven repayment plans or public service loan forgiveness. These options provide significant relief, especially for those facing financial hardship or working in qualifying public sector jobs. Similarly, discussing the consequences of defaulting is equally important. Defaulting on a student loan can lead to severe repercussions, including damage to credit scores, wage garnishment, and loss of eligibility for additional federal student aid. By covering both aspects, counselors can provide a comprehensive financial strategy that includes options for managing or alleviating the debt, while also stressing the importance of maintaining good standing on these loans to avoid long-term financial repercussions. This thorough approach not only informs the client about various paths they can take but also aids in their decision-making related to managing their student loans effectively.