Keep Student Loan co.'s on short leash!

[mariec99]

Over a couple of years ago, I consolidated my student loans. The organization I consolidated with (College Invest, currently handled by NelNet) usually offers to give you a 1/4 % break for signing up for electronic payments and a 1 1/4% break on your rate if you go a certain time period (24 months) of never being late with your payment. I hadn't been keeping track very closely - but last week I called and asked just when the break for no late payments would kick in because I KNEW I had gone at least long enough for the discount. The girl I spoke to said that according to their records, I had 21 months to go (INCORRECT!). I told her that I believed that was wrong and she told me she would check. Lo and behold, I got a letter today saying "congrats! you qualify for a rate decrease!"

I have since found my original consolidation paperwork and it has been 32 months since I consolidated and I know I have never been late. So I contacted the loan people and told them that I thought they owed me a credit becasue the rate discount should have kicked in six months ago! I am waiting for them to get back to me.

This is just a reminder to keep the student loan companies on a short leash! NEVER assume they have the correct records and fight for every little bit of discount you can get. If they have incorrect records - challenge them. Check you credit report and make sure they are reporting correctly and demand a correction if they aren't.

[Broken Arrow]

That is a good reminder!

I pay mine (Sallie Mae) exclusively online, and I make a payment on every pay period (in other words, more than once a month). On the website, I can also see when the due dates are, which at this point has been pushed back to November. But anyway, that's how I've been making sure that I will never be late with a payment....

[Diolla]

I don't have a student loan (anymore) but is there anyway you can get them to apply your extra totally to principle instead of 'extra payments' it seems like that would reduce your debt faster rather than just pushing your payment dates farther away.

Just curious, or is the interest not based on the current balance?

[Broken Arrow]

Yes, I've talked to my lender about this before. They said that there are two ways to pay the principal in advance.

1. Explicitly tell them so.
2. Pay double or more of the minimum payment.

Because I pay online, and because I hate being put on hold for 15 minutes listening to Muzak's greatest hits from the '80s, I basically take option #2. Now, because I pay them every pay period, not every month, I am not always able to meet the "double or more" requirement to get the "principal payment only" option.

The thing is, I've been watching my interest being calculated on my web account very closely, and from what I can tell, it actually doesn't seem to make any difference how I pay them.

The loan is compounded daily. Any amount that I pay automatically goes to the interest first and then the principal. Any amount. When it doubles, yes, it does ask me if I want to drop it all into the principal, which I always check yes. But... it does that automatically when it's less than double anyways. You know what I mean? Or maybe I'm confused here, and if so, please tell me.

The only way I can see things going awry is if I become lax and decide to "take advantage" of the pushed back due date. In which case, I am giving the interest accrued the opportunity to compound itself. That or paying only the minimum amount.

[MarianneJ]

Broken Arrow,

Yes, I pay mine the same way (weekly) and it is like you said - the money automatically goes toward the accrued interest and then whatever is left goes to principal.

For example, if I pay $20/wk, and $4.25 has accrued in interest that week, then the first $4.25 goes to pay that and the other $15.75 goes toward principle. The next week I pay a tiny bit less interest.

My student loans seem to work exactly like my credit cards in this way. I understand that mortgages are different and you must specify whether the payment is to go to interest or principle...but unfortunately I've never had a mortgage to know firsthand. Maybe next year!

[mariec99]

"double or more" requirement to get the "principal payment only" option.

Can you clarify what you mean by this? What is the "double or more" requirement? How do you get to pay principle only?

[Broken Arrow]

Well, when I submit an online payment that is twice that of my monthly minimum, it gives me an option of whether or not I want to pay the principal, or if I want to push back the due date. Since paying the principal is the default option, I simply click continue after that....