Help me understand how my student loan payments are calculated.

[Nika]

I have a student loan at a very low percentage rate, so I don’t want to take savings to pay it off. However, I’ve been putting some extra payments here and there and wanted to play with the figures, because it seems silly to keep it for another 12.3 years that my auto-generated loan letter estimates. However, I have trouble understanding how SallieMae arrived at these figures.

---------------
According to their letter here are my current numbers:

Current principal balance $14,348.31
interest rate 2.125%

148 payments of 140.75, starting on 02/02/2013
and 1 payment of $141.06 on 06/02/25
---------------

So, in total 149 month left. However, if I plug it into the bankrate loan calculator
Amount of $14,350 with 2.125% interest rate, if it is to be paid off in 149 months, the monthly payment should be $94.37, not $140.75 as listed by SallieMae.

Even if I assume that I don’t pay a single payment for a year (because I’m not required, each time I send an extra payment they advance my due date, but I just ignore it and keep paying every month) and I will assume that the computer program that generates the letter assumes I won’t make payments if I am not required, than, in that one year I will accrue $305 more in interest... but even if I start repaying $14,655 in February of 2013, over 149 months it would still be $111.99 per month, still far from 140.75. So something does not add up here and it bothers me that I don't understand it.

[kv968]

The only way I come close to their monthly payment number using the Bankrate loan calculator is if they're charging 2.125% interest PER month on the principal before the first payment in February of next year. Then using that amount with the accrued interest as your prinicipal.

$14,348.31 with 2.125% being applied monthly for 11 months would be $18,082.30
149 payments of $138.18/month

$14,348.31 with 2.125% being applied monthly for 12 months would be $18,466.54
149 payments of $141.11/month

I'm not sure if that's what they did but that's the only way I could get those numbers. My math and/or thinking might be wrong but I'd definitely check it out.

[neguy11]

What was your original principal balance? The payments are probably based on what your original principal balance was and they've just never reamortized the loan.

[Nika]

The original balance was something like 34K. And all the data in the auto generated letter changes - the date, the date of the next required payment, principal balance... It is updated everytime I run it. So it does not make sense that the rest of the numbers would not get updated.

[jbings4]

Nika

Well done on paying down your student loans in advance. I would change one thing about your current payoff plan.
You say that you make extra payments and they just continue to push your due date back. This needs to change! The student loan company is not applying your extra payments directly toward the principle balance, instead they are taking your payments and counting them as normal monthly payments therefore pushing your due date back. You will save a lot of money in the long run if you tell the SL company to apply your entire extra payments toward the principle balance.

[ecoadapt]

The only way I come close to their monthly payment number using the Bankrate loan calculator is if they're charging 2.125% interest PER month on the principal before the first payment in February of next year. Then using that amount with the accrued interest as your prinicipal.

$14,348.31 with 2.125% being applied monthly for 11 months would be $18,082.30
149 payments of $138.18/month

$14,348.31 with 2.125% being applied monthly for 12 months would be $18,466.54
149 payments of $141.11/month

I'm not sure if that's what they did but that's the only way I could get those numbers. My math and/or thinking might be wrong but I'd definitely check it out.

This would somehow explain,if it's not what they did, you can check it out.

[kv968]

This would somehow explain,if it's not what they did, you can check it out.

That kind of "explains" it, but it doesn't make sense to me.

[phantom]

When I was paying extra on my student loans, it worked the same way you have described here. My future payment amounts remained the same, but the next date I had to make a payment kept moving backwards as though I was just making my regular payments early. I used an Excel spreadsheet to predict how changing my payments and paying extra would impact my loans. Since the principal dropped like my spreadsheet said it would, I didn't give any thought to the way the future payments were working.

Twice that I remember during the seven years that I kept my student loans, the lender re-amortized my payments for me. After re-amortization, my minimum payments would drop such that if I followed them, it would take me till the end of the original term of the loans to pay them off. So, I ignored the change and kept paying off my loans at my own pace. When I got near the end, I just requested a payoff amount, so I never had to worry about the listed future payments.

I would suggest watching to make sure your extra payments are being applied properly. As long as the principal and interest that you're paying look right, I don't think you have anything to worry about. If you're really curious though, I would call the lender and see if they can explain what they do and why.

[Savingbtime]

Actually,ii have just learned from sallimae that the best way to apply extra money towards the principal is to apply it on the same day that the loan is due. I have just done for one month and went online to verify it and it did state that the extra was applied towards the principal. Check it out and let us know how it worked out for you.