To start this post off, what is a Sallie Mae Loan? When you filled out your FASFA and aquired student loan debt, your loans are held with companies like Sallie Mae or Navient. Navient is actually a spin off of Sallie Mae when they seperated out their loan servicing operations. Sallie Mae is a company that collects and services private education loans.
Sallie Mae and Navient are notorious for making it challenging for people to pay off their students loans faster. This is beyond frustrating for people trying to get out of debt and become more responsible with their personal finance.
If you were lucky enough to have your federal loans taken by Nelnet then it is your lucky day. Nelnet makes it easy to make sure you are paying down principle with your extra payment and not pre-paying months ahead. The feature that Nelnet uses is called “Do Not Advance Due Date“. If you leave this box unchecked you will pre-pay the following month’s minimum payment including the interest for that month. If you check the box then the extra money above your minimum payment will go straight to principle, paying down your loan, and the interest that will be calculated on it.
Sallie Mae & Navient make this much more challenging. If you have ever talked to them on the phone you will quickly realize you are not dealing with the “brightest” human-beings. I take that back, they are just dumb, like so dumb. You might think that since they are one of the largest loan providers of federal student loans that you will get great customer service, sadly this is not true. Searching through the “Frequently Asked Questions” I finally found how payments are distributed.
What happens if I pay more than my Total Amount Due?
“All payments are applied to your loan(s) upon receipt. Unless you make your payments through automatic debit, the overpayment amount will also reduce the Current Amount Due on your next billing statement(s).”
So what does this mean? Well, it means you are not actually paying down the principle for that month. You are pre-paying principle and interest for the following month. Thus, more interest will be growing on your principal amount. You do not want this. You want your extra funds going right to principle after all past amount and current amounts due have been paid.
How can I fix this? How can I pay extra on principle? You are going to need to call them and request that the “Pay Ahead Feature” for your loans is turned off. They may request you send them this request in writing. You will need to be very specific will them and it will likely take a few calls to make it happen, but this is how to not pre-pay coming months. Another trick, users around the financial blog community have noticed, is if you enroll in “auto debit” and pay a separate payment that same day, the separate payment will go to principle and not pay ahead.
If all else fails, simply pay your minimum payments and open a separate savings account to build it up to each loan payoff amount. Give Sallie Mae or Navient a call and send them cashiers check or money order for the specific loan payoff. You can call to get the loan payoff amount or click “Calculate Payoff Amount(s)” at the top of the loan details page.
While Sallie Mae and Navient may make it harder to get out of debt faster, you can still do it. Jump through the extra hoops and knock this debt out. Pay off Sallie Mae early and evict her from your life.
Post your horror stories talking with these companies in the comments below.