Wife has auto debit set up on Nelnet for minimum amount currently. We want to begin paying extra monthly to get rid of this thing ASAP.

Where I get confused is due I need to call the people monthly and let them know we are paying extra and have them apply it to the principal. OR just pay the extra per month and have them roll in into the advanced due date portion?



I've been reading so much mis-info online it is making my head explode. This is what their website says....Keep in mind all her loans have been consolidated so they just fall into one umbrella. I am student loan dumb since I never had to deal with them.

Paying More Than Your Current Amount Due: Unless you direct your payment to an individual loan or group, the standard allocation method is as follows. After your current amount due is paid, payments are allocated across loans in repayment status starting with the highest interest rate. Once the loans in repayment status with the highest interest rate are paid in full, any remaining payment amount will be allocated across the loans with the next highest interest rate. If two or more loans in repayment status have the same highest interest rate, the payment will be allocated first to the unsubsidized loans and then to the subsidized loans, in proportion to each loan's regular monthly payment amount.
When you pay more than your current amount due, your due date on loan groups in repayment status will advance by one month each time you satisfy the regular monthly payment amount for that group. Your monthly billing statement will show $0 due for that loan group.

• Since your excess payment will continue to be applied to the loan group starting with the highest interest rate, you will continue to have an amount due for loan groups with lower interest rates.**
• You have the option to request that we not advance your due date when you pay more than your current amount due. See "Can I direct payments to loans or loan groups?" below for more information.
• If you want your excess payment to continue to advance the due date of all of your loan groups in repayment status, you can direct your excess payments to all loan groups in repayment status, instead of targeting the loan group(s) with the highest interest rate, as a one-time or recurring special payment instruction. This will help keep the due dates for all loan groups aligned.

quanah said:

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Instead of doing all that, wouldn't it be easier to just elect Bernie Sanders?

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Call them to make sure that they are applying the additional payment to principal. Also get them to follow up in writing to show that the over payment was applied to principal.

They default to applying over payment to the next month's payment (basically you giving them an interest-free loan) instead of applying to principal.

That, by the way, is what student loan owners and servicers want. The last thing they want is for you to just pay the thing off. They don't make much money that way.

Read This

Just reading what you posted, it says exactly what my first post said they do: apply the overpayment to the next month's payment instead of applying it directly to principal. So like I said, get them on the phone, get it confirmed in writing, and yes, you will probably have to do this every last month until the loans are dead.

blindey said:

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Call them to make sure that they are applying the additional payment to principal. Also get them to follow up in writing to show that the over payment was applied to principal.

They default to applying over payment to the next month's payment (basically you giving them an interest-free loan) instead of applying to principal.

That, by the way, is what student loan owners and servicers want. The last thing they want is for you to just pay the thing off. They don't make much money that way.

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That's not exactly how it works, but you're very close. The overall theme of your post is correct, especially the last part.

I outlined the process in the thread I linked. Applying the additional amount to the next month is fine, as long as you get credited for the difference when the loan is paid off. That's the important phone call to make (the one at the end, not one right now, which will do nothing). They usually can't apply the additional amount to principal because it's a precomputed loan, not a simple interest loan. You won't benefit from the early payments until the whole thing is paid off.

Forgot about that thread and how the loans are not only structured but booked in a way to keep you from ever managing them properly as a liability.

Yep - it's brutal. Still makes sense to pay them off early, but it certainly feels like you're not making any real progress until it's over.

Gramercy Riffs said:

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as long as you get credited for the difference when the loan is paid off.

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So isn't this just giving the lender an interest free loan on these funds? Or put into layman's terms, how is this not just a scam?

In the short term it may seem that way, but the line of thinking is that if they've done things right, it all evens out in the end. (EDIT: it is a loan, but it's not interest-free) And the credit should happen automatically - I only include the bit about making that phone call in the event that you don't see what is essentially a refund check. If we think shady companies structure loans this way, how about the companies that don't automatically send that check for the difference? Terrible. I don't know of any specific cases where that's happened, but surely it has, right?

Just get used to calling these guys quarterly because they WILL screw this up. Everytime.

chipotle said:

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Just get used to calling these guys quarterly because they WILL screw this up. Everytime.

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If "screw this up" means that they don't apply it to principal, then yes, that's true. But once you realize that in most cases they can't apply it to principal because the loan isn't set up that way, then "screw this up" simply means it isn't structured the way you want it to be. And you'd be correct for wanting it done the other way, of course. But that isn't happening unless you refinance it somewhere else, and the interest rate will probably be higher now, so you'd only be screwing yourself.

OP - just keep making extra payments. Once it's paid off, settle up on the interest you saved.

So the only way to pay off a student loan like this early is to pay the entire principal and interest through the life of the loan and then expect a "refund" check back, right?

Wouldn't that sort of loan (1) be extremely easy to book and track on two different bases and (2) wouldn't this practice be a massive violation of federal and state lending/usury laws?

I mean....if this is the normal practice in student lending (and especially in used car automotive finance), how is there not massive class action litigation about this practice already ongoing -- especially in places like CA?

Ok, this thread has got me a little nervous and confused. I paid for several years well over the minimum monthly payment and then paid the balance off a few years ago which was almost $15,000. At the time I thought that the extra payment amount was going to principle, but that if I didn't make a payment one month it was Ok I would just be paying extra interest on the next payment. Should I have gotten a refund when I paid off the loan?

Edit: I just checked online and the extra payment was definitely going to principle.

If she croaks, they wipe away the student debt, so pay off everything else first, then bump her off.

When you made extra payments, were your automatic payments (if you had them set up) still being made, in full, each month?

If so, then they were going to principal.

1939 said:

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Ok, this thread has got me a little nervous and confused. I paid for several years well over the minimum monthly payment and then paid the balance off a few years ago which was almost $15,000. At the time I thought that the extra payment amount was going to principle, but that if I didn't make a payment one month it was Ok I would just be paying extra interest on the next payment. Should I have gotten a refund when I paid off the loan?

Edit: I just checked online and the extra payment was definitely going to principle.

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Ditto this...I'm worried I overpaid now. I definitely did not get a refund upon payoff. It was my wife's loans so I can't call them to discuss but will have my wife do it ASAP.

In the mean time I'm looking back through payment history:

I made $100,557.50 in extra payments, of which $10,366.15 was applied to interest instead of principal. Most of that appears to be from the initial payment we made before we started paying them off, if that makes a difference.

Can someone tell me if I should be owed money?

Thanks and Gig'em.

sellthefarm said:

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1939 said:

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Ok, this thread has got me a little nervous and confused. I paid for several years well over the minimum monthly payment and then paid the balance off a few years ago which was almost $15,000. At the time I thought that the extra payment amount was going to principle, but that if I didn't make a payment one month it was Ok I would just be paying extra interest on the next payment. Should I have gotten a refund when I paid off the loan?

Edit: I just checked online and the extra payment was definitely going to principle.

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Ditto this...I'm worried I overpaid now. I definitely did not get a refund upon payoff. It was my wife's loans so I can't call them to discuss but will have my wife do it ASAP.

In the mean time I'm looking back through payment history:

I made $100,557.50 in extra payments, of which $10,366.15 was applied to interest instead of principal. Most of that appears to be from the initial payment we made before we started paying them off, if that makes a difference.

Can someone tell me if I should be owed money?

Thanks and Gig'em.

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Rule 1, and then I will give my opinion.

I posted on the B&I thread as well. My experience with a different federal servicer (Mohela) is that when I made extra payments, it would apply all of the interest due through the date of the payment, and then the remainder would go to principal. Note, this is different than what you might get if you pay extra on a mortgage without explicit instructions for it to apply toward principal. You could always test a trx (say $10 more) and see how they handle it.

Why don't you roll that **** over to sofi or something like that?

On student loans, interest is accrued daily. And all payments are applied in the same order, late charge/fees, outstanding interest, then principal. If you have multiple loans, then the company can get cute with how they apply the payments.

I don't understand why you are not making payments online. This is by far easier and you should have a confirmation number or get to see how the payment is applied.

You can't make a payment and then turn around and make another payment a week later "only to principal" it doesn't work that way and no matter how many phone calls you make they can't go against the promisory note you signed.

If you pay ahead, you will pay less interest because the next month there will be less interest, as the principal has been reduced.

If you have multiple loans you can attack the highest interest loan, this is called the Avalanche method. You can attack the smallest loan amount, which is called The Snowball method (the Dave Ramsey special).

My SL service is Great Lakes - it's very easy to see where the money is going as it's all right there. Anything paid above interest lowers the principal.

I refinanced to Sofi Mohela last year (from Nelnet) and highly recommend it.

We paid off my wife's loans with nelnet and finished last year. My advice would be to pay online biweekly. Like others have mentioned, interest accrues daily so there isn't really such thing as a principal only payment, but it is still very valuable to pay off early. Ours looked something like this:

Our minimum monthly payment was about $300. We knew we could pay $750 per month. So we set up the auto debit to pay $375 on the due date and then I made a manual payment of $375 on the 16th of the month. So the first payment took care of principal and interest from the last half of the previous month. Then the second payment paid off the interest accrued during the first half of the month first and then the remainder paid off principal. Didn't have to make any calls or anything. Submitting that final payment sure felt good.

Also like others have said, pay off the highest interest loan first even if it has a lower balance. For example if you have a $20,000 balance at 6.5% but a $5,000 at 7.5% put it all towards the 5,000 loan. Think of it with the mindset that You don't have one 20k loan and one 5k loan. You have 20 $1000 loans and 5 $1000 loans. That makes more clear to Pay off the higher one first.

Best of luck.

Touche but no way Jose