Specific Federal Student Loan Question - Kwikpay

[iliketosavemoney]

I have a federal student loan that uses the Kwikpay auto-debit system.

I have the minimum payment set up a month and there is a box to make an additional amount on top of the minimum. I thought this additional amount would be applied to the principal but now I'm not sure it is.

The help menu says:
Paid ahead. You must choose the KwikPay Override option if you want KwikPay to debit more than your minimum monthly payment due. This is because the additional amount is applied to future payments and at some point will make no amount due during your current month. When this happens, your next payment due date moves further into the future; this is called being paid ahead. With the KwikPay Override option, your automatic monthly payments continue even if your student loan is paid ahead.

Does this mean its just applying my additional payments to the next payment, and not applying it to the principal? I'm assuming doing this won't shorten my loan period?

Thanks in advance.

[disneysteve]

Does this mean its just applying my additional payments to the next payment, and not applying it to the principal?

Yes, that's exactly what that means.

I'm assuming doing this won't shorten my loan period?

Sure it will. Let's say it is a 10-year loan, so 120 monthly payments. If you pay 1-1/2 payments each month, you'll complete your 120 payments in 6-1/2 years.

The problem is that you will still have paid the exact same total amount. You won't have saved any interest.

I would call the lender and ask if it is possible to prepay the principal and, if so, how to go about doing that.

[iliketosavemoney]

Hey disneySteve,

Thanks for your reply!
Makes sense now!

[tan fish]

I have a federal student loan that uses the Kwikpay auto-debit system.

I have the minimum payment set up a month and there is a box to make an additional amount on top of the minimum. I thought this additional amount would be applied to the principal but now I'm not sure it is.

The help menu says:
Paid ahead. You must choose the KwikPay Override option if you want KwikPay to debit more than your minimum monthly payment due. This is because the additional amount is applied to future payments and at some point will make no amount due during your current month. When this happens, your next payment due date moves further into the future; this is called being paid ahead. With the KwikPay Override option, your automatic monthly payments continue even if your student loan is paid ahead.

Does this mean its just applying my additional payments to the next payment, and not applying it to the principal? I'm assuming doing this won't shorten my loan period?

Thanks in advance.

If they are calculating loan interest daily, after you make your auto payment, then make an extra payment the next day. Most of that payment should go towards paying off the principal.

[auron]

Make sure this applies to your SL first, but fed SL's apply payments to outstanding balances in the following order without extra work on your part.

1. Outstanding fees and collection costs
2. Outstanding interest
3. Outstanding principal

FinAid | Loans | Prepayment

[phantom]

When I had student loans, when I would pay extra, the extra counted towards future payments and went towards principal. My account showed the interest that accrued daily, and whenever I made a payment, the interest was paid first and whatever was left over went to principal. Meanwhile, whatever amount I had overpaid by counted towards my next payment. So, if my minimum was $170 and I payed $200, next month my minimum would be $140. Eventually, the minimum I owed was $0. Every once in a while, they would re-amortize the loan and figure out new minimum payments that would allow me to pay off the loan according to the original term.

I would suggest calling the company to find out for sure what happens to the extra payments you make through Kwikpay. They could apply them to the principal like they did with mine or they could just count them as you paying them in advance as DisneySteve explained. If extra payments don't go towards principal, find out what you have to do to get them to do so.

[kathkylee]

Iliketosavemoney

I just spent 35 minutes argueing with several customer service ( use the term loosely) reps regarding this very issue. I have exactly the same problem. I believe we are being duped! I think we are paying interest and not the extra principle as normally thought. I was passed around from person to person. I must let you know that this saga has gone on for a year now. In the last 12 months I have only logged 5 payments most of which went to interest. I am paying $400 extra per month which should be going towards principle. Very frustrating to say the least. I feel like I am at a loss. I am contacting my congress man tomorrow. The FAFSA folks keep telling me it is an isolated incident and that some people just have trouble with Kwikpay. Ridiculous. Any ideas on who else I can take this complaint to? I am at my wits end on this topic! Thanks in advance.