Release date: July 26, 2004
Contact: Elaine Justice, Associate Director, University Media Relations,
at 404-727-0643 or ejustic@emory.edu

Emory Offers Tips on Student Loan Consolidation

With interest rates so low, the rush is on to consolidate student loans, says Maria Carthon, assistant director of financial aid at Emory University. "Consolidation is such an attractive thing right now; everyone's trying to take advantage of it."

But if students do decide to consolidate, Carthon advises keeping a few things in mind. First, "wait until close to the end of your grace period before you consolidate your loan," she says. "Don't consolidate too soon because you'll forfeit part of the grace period."

Also, students aren't aware that if they have only one lender they must consolidate with that firm. "If, on the other hand, you have more than one lender, you can shop around for the best consolidation deals."

So what's the difference among lenders? "All lenders have the same going rate, but some make their services more attractive by offering different repayment incentives," says Carthon. Most lenders will reduce the interest rate by a quarter of a percent if you allow automatic deduction from your bank account. Others offer up to a one percent reduction in the interest rate if you make on-time payments for anywhere from 36 to 48 months.

"Some lenders also offer cash-back rewards or credits to your account," says Carthon. "After you make on-time payments for a certain period of time, they will credit three percent of the remaining balance. In some cases, lenders may actually send customers a check for three percent of the remaining principle balance or three percent of the original principal balance."

When searching for the best loan deals, Carthon advises avoiding lenders you don't know anything about. "So many companies are taking advantage of the consolidation frenzy," she says. "Stick with someone you've done business with before or someone you know something about with a history that you can trust."

And get everything in writing. "Make sure that you understand exactly what the lenders are saying and get it on paper before consolidating," she says. That way there won't be unpleasant surprises down the road.

Carthon also urges students to get rid of their credit cards. She and other financial aid officers see students every day who are struggling with credit card debt. "Unfortunately, many students have trouble distinguishing between wants and needs," she says. Carthon advises switching to a debit or check card. "That way, you only spend money you already have."

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