Tess Van Duvall is a woman with a mission. She has taken on the role of educational debt management consultant in the Office of Financial Aid, and her clients are the scores of Emory students across the University whose lives and financial futures are in the hands of lenders. Student loans may hang heavily over the heads of many who will graduate May 12, but Van Duvall thinks she can help; in fact, she knows she can.
"The important thing is that students know their options and their responsibilities once they graduate," said Van Duvall. That alone is easier said than done. Gone are the simpler times when students borrowed a federally funded Guaranteed Student Loan (GSL) with a locked-in interest rate and a 10-year repayment cycle. Tuition may be more expensive than ever, but "now you have all these options" for financing your education, Van Duvall points out. More options in lending also means more options in financing and repayment, and Duvall intends for students to have a clear idea of their choices so that they can make the best one for their future.
When Van Duvall began working as an assistant director in the Office of Financial Aid in the fall of 1995, the idea of "debt management" was relatively new. Most students received only general information by attending group exit counseling sessions, which are required for students receiving federal loans. When information was too generic, said Van Duvall, students got bored.
"I felt we should put people together with a common loan history and common financial questions," she explained. Once Van Duvall began contacting loan guarantee agencies, lenders, secondary markets and gathering information from them, she found resources galore. One resource packet she distributes to students is from a company called The Access Group, formerly named Law Access, which offers loans to law schools but is now branching out into other disciplines. Included in the packet are brochures on financial planning, maintaining good credit and even a guide to lenders' language, which Van Duvall admits can be confusing.
"A lot of times people go into default because of miscommunication," she said. "Many students think the term 'default' merely means they're delinquent. They don't understand that a default will affect their lives; they can't go on until this is paid off. They can't get a car loan, can't get a house, can't get any kind of credit."
The best part of the packets Van Duvall distributes is a diskette program that helps students do their own quick financial projections; they key in the amount of their loans, interest rates and terms, and the program gives them a projected repayment schedule. The Access Group, Norwest Bank and Citibank offer tailored packets for law students, medical students and public health students respectively. "Lenders really will work with you," she said. "It's in everyone's best interest, including the future generation of borrowers, to prevent default."
One of Van Duvall's most valuable tips to students is to prepay interest on unsubsidized and private loans while still in school; that strategy alone can lead to substantial savings in monthly payments later. "If students can pay interest on their loans during the four years they're in school, they can reduce their eventual monthly payment by $100 to $300 a month or even more, depending on the loan amount," she said.
For example, interest on an initial $10,000 loan will be only $8 to $10 a month; interest on multiple loans may eventually build up to $50-$60 per month by the third or fourth year of school, but saving hundreds is worth it, she said. "A lot of students think the interest is more than it is. When I tell them they can pay $8 to $10 a month, they're surprised."
For undergraduates who go on to graduate programs, Van Duvall advises not to consolidate multiple loans, which works much like consumer bill consolidation loans, but has some drawbacks. Students with a combination of government subsidized and private loans who consolidate will end up losing some advantages of their subsidized loans, including in-school interest deferment and a lower interest rate.
But consolidation can be a lifesaver for some. For example, a student who has a $90,000 debt and is going earn $45,000 a year "cannot afford that $1,200 monthly payment," said Van Duvall. Consolidation of existing loans and extending the repayment period from 10 to 30 years can reduce monthly payments enough to make ends meet. "I do encourage students to use that as their last option; it's not something they should jump into."
For students whose earning potential may not be great over the long run, there's another type of consolidation program offered by the U.S. Department of Education called the Income Contingent Repayment Plan, which can save students thousands of dollars if they qualify. For those whose economic crunch will only last a couple of years, Van Duvall counsels patience and economizing.
A graduate of Georgia State University with a degree psychology and business management, Van Duvall enjoys her new role immensely, even though making presentations before groups made her nervous at first. "I wanted to do it just because I was nervous," she said with a laugh and admits that she used to stutter as a child growing up on the island of St. Thomas in the U.S. Virgin Islands.
Van Duvall's immediate goal is getting the word out to Emory's various schools that debt counseling is available. Her overall objective, she said, "is to inform, to bring awareness to students [and] staff. The more people who know about debt management, the better it is for everyone. My job here is to make debt management part of an attitude, to incorporate it into the Emory system so that it's not just a job; it's a way of doing our job. It's not something I can do all on my own," she said.