Trying to make extra principal payments on your student loans is amazingly difficult. And I say difficult because the loan processors almost always mess up the application of those additional principal payments to your loan balance.
Almost every other lender of any sort (credit cards, auto loans, or mortgages) can handle an extra principal payment effortlessly and accurately. But not student private or federal student loan processors. For some unexplained reason they can’t handle such a very basic transaction… and you need to be on your toes as a result.
The new federal agency, the Consumer Financial Protection Bureau, said some interesting things in this article. Here is a quote from the article:
“In the ombudsman’s annual report, released Wednesday, Chopra detailed the problems that borrowers have trying to pay down their private loans, and how a seemingly intentionally confusing system often holds borrowers hostage. In the end this takes a toll on their credit score—and on their ability to buy a home or anything else with borrowed money.
“Repaying a student loan should be simple,” CFPB director Richard Cordray said in a statement. “When servicers process payments to maximize fees and penalties they undermine the trust of their customers. Student loan borrowers deserve better; they deserve transparency and accountability.”
I’ll talk about the interesting focus of this new government agency in a future post (private loans vs. federal loans), but for now I just want to encourage you to be all over the details of how every single payment you make on your student loans are recorded.
Especially when you are aggressively paying extra in order to get your student loan out of your life.
Knowledge is key. Know the facts… because your loan servicer might not!
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