Rukh O'Rorke
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Post by Rukh O'Rorke on May 27, 2019 14:48:07 GMT -5
So, every time I make an extra payment, they recalculate my auto monthly payment so I am still on a 20 year repayment schedule. I did not choose a 20 year repayment schedule, the balance is just a shade over 8k, so, madness! I can't set my payment to have a little extra go to principal each month. NO. you have to call them to do it. Totally doing business like it's 1999. I would like to make a level payment, just rounded up to the nearest 10$ increment, and make extra payments on it when I can. But I think if I do call and arrange this, then they will just put it down as 2.40 extra to principal, and next 100 payment will make it an odd amount again, rather than increasing the extra payment to 3.78 or what ever. Should I bother to call and set this up? Then bother them again after they recalculate things? Or just let them do their shenanigans and keep making extra payments? There is no online way to apply the extra to principal, again - one must call them. But again - absolutely everything about this is designed to keep the person in debt for as long as possible. As a somewhat-savvy consumer, I can see this. Really a shame for the younger crowd trying to manage their debts and being stymied at every point on making a little dent in the balance here and there at a time in their lives when they really may not have the experience to see this. Super disappointed at the system here.
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steph08
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Post by steph08 on May 27, 2019 16:05:25 GMT -5
I don't know if it is worth all the trouble. I would probably save up the extra in a savings account and make one extra payment a year.
I have been paying extra on my DH's student loans, and thankfully I can do it online and pay it directly to principal. My monthly payments stay the same. It does say something like "paid ahead until 09/2019" as well to show how many months I am paid ahead.
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shanendoah
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Post by shanendoah on May 27, 2019 16:07:49 GMT -5
This is part of why private student loans are such a pain. Back when I started college (25 years ago), and worked in financial aid, one of the first bits of training I got was on "entrance" and "exit" interviews, where I had to be able to answer general questions about federal student loans. Back then, it was assumed the pay back period on your loans would be 10 years. With the way federal student loans have ballooned in the past 25 years, it would not surprise me of the default now was 15-20 years. But no, you most likely were never asked what you wanted your payback period to be. What it would be was probably in your original private student loan promissory note, along with how they handle extra payments. I do remember that when I started paying student loans back, I had to mail everything in with the little coupon, and if I did not check that I wanted extra to go toward principal, they would apply my extra to the next month's interest instead, so that it would have been possible for me to pre-pay 10 years worth of interest BEFORE I made any additional dent in principal.
But as to your question, I think the answer is you call them every month and say "apply extra to principal", or, instead of auto paying through their website, you autopay through your bank's bill pay, and there, you can generally add a memo, and put the "apply extra to principal" note on that.
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weltschmerz
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Post by weltschmerz on May 27, 2019 17:18:05 GMT -5
My VISA card always came with warnings, that if I pay only the minimum payment, I would pay it off by about 2068. I said screw it and paid the whole thing off in full, even though I have to tighten my belt now. I hate, hate, hate stuff like that hanging over my head.
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Rukh O'Rorke
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Post by Rukh O'Rorke on May 27, 2019 20:07:13 GMT -5
I called to get a larger payment on auto debit, and confirmed that if I make any extra payment they will recalculate and lower my payments.
I'll just have to keep calling them.
What asses.
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phil5185
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Post by phil5185 on May 28, 2019 8:15:04 GMT -5
What is the interest rate?
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flamingo
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Post by flamingo on May 28, 2019 8:18:32 GMT -5
I HATE how student loan servicers make this so hard. I have 2 student loans, the 1st of which is easy to make extra payments towards principal on, the 2nd, impossible. Guess which one I'm making extra payments on? It also happens to be the one with the higher interest rate.
I could make extra payments on my 2nd loan, but I'd have to call and talk to someone. And hope that someone understands what I mean when I say, I want to pay an extra $100, applied towards the principal. Because my experience in the past is that they don't understand and they apply it wrong. So, once my 1st one is gone, I'll then deal with how to pay extra on my 2nd. Ugh!
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Deleted
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Post by Deleted on May 28, 2019 18:50:19 GMT -5
This is something I have never understood so someone can explain it to me.
If you pay extra on your student loan and it is applied to "interest," is it possible to prepay interest that you don't owe yet? And what happens if you have prepaid it and then pay off the loan early, anyway?
In other words, isn't interest figured monthly on the balance?
I've seen extra $$$ applied to future payments, but I've never understood the applied to interest thing.
The only loan I have is the mortgage, and I pay extra principal toward that. But I always wondered what the big deal is.
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debthaven
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Post by debthaven on May 29, 2019 1:36:35 GMT -5
I like steph08 's idea. Save for a few months then call them once or twice a year to prepay.
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Rukh O'Rorke
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Post by Rukh O'Rorke on May 29, 2019 7:41:17 GMT -5
This is something I have never understood so someone can explain it to me. If you pay extra on your student loan and it is applied to "interest," is it possible to prepay interest that you don't owe yet? And what happens if you have prepaid it and then pay off the loan early, anyway? In other words, isn't interest figured monthly on the balance? I've seen extra $$$ applied to future payments, but I've never understood the applied to interest thing. The only loan I have is the mortgage, and I pay extra principal toward that. But I always wondered what the big deal is. Yes - they do it all the time if you are not watching! You pay your regular bill of 100 on the due date, a week later you pay 50 extra. They apply that to your next regular payment (which is not due for 21/22 days!), which is 60 interest/40 principal. Then when your payment goes through (if they haven't reduced your autodraw to 50 or something!) - then they will credit it towards principal. I don't know what they hell kind of laws allow this, but it is really anti-consumer.
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Rukh O'Rorke
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Post by Rukh O'Rorke on May 29, 2019 7:42:08 GMT -5
What is the interest rate? almost 8%. They recently raised it. adding: Not that the interest rate even matters here, Phil. This is about the principal of the thing and I'm not in the least concerned about myself here, just the general practices that are impacting our younger adult population as they try to get out from under student loan debt.
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Rukh O'Rorke
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Post by Rukh O'Rorke on May 29, 2019 7:44:50 GMT -5
I like steph08 's idea. Save for a few months then call them once or twice a year to prepay. but that plays right into their hands, as you are paying interest on a larger balance for those months. The other side is think about how much more expensive it is to staff call centers for people to adjust a payment rather than click on the website. They must be making a lot more money making it hard and keeping people in higher debt. They are wasting my time. Well -- I'm going to waste theirs as well.
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oped
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Post by oped on May 29, 2019 7:58:25 GMT -5
They are getting paid regardless... are you?
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Deleted
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Post by Deleted on May 29, 2019 8:46:16 GMT -5
It's such a cluster f*** system. Every board I go to (yes, I have a problem and go to way too many) there are people struggling with student loans in some way. And yes, if a money savy person in her 50's is having issues, can you imagine some kid fresh out of school trying to navigate this mess? I've been bouncing around the idea of having DS take out all the subsidized loans he can get to give us a few more years with the money invested but I'm not sure it's worth it.
For 8K, I'd be inclined to figure out some way to pay it off in a lump and be done with them for good.
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Bluerobin
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Post by Bluerobin on May 29, 2019 9:23:58 GMT -5
Go borrow the money from another source and pay off this loan. It is NOT worth the hassle.
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shanendoah
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Post by shanendoah on May 29, 2019 9:27:19 GMT -5
minnesotapaintlady - If it helps, Rukh O'Rorke is talking about her private loan here. The Federal Subsidized Stafford loans are now all direct lending from the government (25 years ago, when I was doing the SL thing, there was no direct lending - you still picked a bank). And the repayment system on those (when last checked) did allow you to just check a box that says the payment should go toward principal. And especially if you think you might start paying those back while he's in school, the subsidized are a good deal, because you don't get charged any interest while attending school at least half time. So any payment made while he's in school goes straight to principal.
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cktc
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Post by cktc on May 29, 2019 11:03:54 GMT -5
I called to get a larger payment on auto debit, and confirmed that if I make any extra payment they will recalculate and lower my payments. I'll just have to keep calling them. What asses. If the larger payment in on auto debit, does it matter that they recalculate? Or is this auto debit separate from the regular payment?
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Rukh O'Rorke
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Post by Rukh O'Rorke on May 29, 2019 11:19:20 GMT -5
I called to get a larger payment on auto debit, and confirmed that if I make any extra payment they will recalculate and lower my payments. I'll just have to keep calling them. What asses. If the larger payment in on auto debit, does it matter that they recalculate? Or is this auto debit separate from the regular payment? It's tacked onto the regular and overall payment will just decrease which each additional extra payment.
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Rukh O'Rorke
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Post by Rukh O'Rorke on May 29, 2019 11:23:22 GMT -5
Again this is not a big deal for me, but pointing out how the system is actively trying to maintain the largest balance possible and keep the borrowers in debt as long as they can.
I've never encountered this type of thing in my life.
Completely moral bankruptcy.
And when I think that this is most people's introduction to capitalism at work, no wonder youth is sliding more socialist.
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haapai
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Post by haapai on May 29, 2019 12:48:11 GMT -5
I understand your anger and your sense that your private student loan servicer is applying your excess payments in a way that disadvantages you.
Unfortunately, I do not understand what you mean by "recalculate my auto monthly payment so I am still on a 20 year repayment schedule". This statement could mean that the lender is doing at least three different things.
The three different recalculations that come to mind are as follows.
A). Your lender is reducing the amount of the next monthly auto payment by the amount of the over payment. In other words, the excess payment is being applied to the next payment due and will return go back to normal the next month. To hang some numbers on this bugger, let's use some numbers similar to what you have stated. Let's assume a beginning balance of $8000, an annual interest rate of 7.75% compounded monthly (because I hate futzing with daily interest rates and months with varying numbers of days) and 240 remaining payments. With these numbers, the minimum monthly auto pay would be set at $65.68 and a payment of $70 would result in the next auto draw being reduced to $61.36. In the absence of a change in interest rates or further extra payments, the auto payment amount would return to $65.68 in subsequent months.
B.) Another thing that may be happening is that the amount of the auto pay was recalculated because the interest rate changed. You mentioned that the rate recently changed to 8% so it would have been necessary to recalculate the minimum required payment. When holders of variable rate loans do this, they routinely use the remaining number of payments when performing the calculation. It is not feasible for them to look at the an existing debt amortization table, observe that extra payments have shortened the remaining life of the loan, and use the smaller number of remaining payments when performing the recalculation of the payment due.
C.) The third thing that may be occurring is that the lender recaclulates the minimum amount due every time an excess payment is made. I think that this is unlikely, but here are some numbers to illustrate it. The principal is $8000, the interest rate is 7.75% (and doesn't change) and the minimum monthly auto pay is $65.68. If a payment of $70 is made, the principal is reduced by $4.32 more than it would have been and a recalculation of the minimum amount due (until the next interest rate change) occurs. The new minimum auto pay will be a few cents less than the previous one if over 200 payments remain. (I thought that I had the nerd chops to calculate this number but apparently I over-estimated myself.) I may have just tumbled into a nerd-hole. I'm curious about how the lender is recalculating the auto payment amount but what really matters is the interest that you are being charged and the fact that you are going to have to push money at this debt instead of using auto pay. (Auto pay still has some value as a fail-safe way of making sure that payments get made.)
My suggestion would be to push level payments at this amount for a couple of months and then scrutinize the interest that you are being charged and the balance to see if paying extra is reducing the amount of interest that you are paying.
You may not be getting treated as badly as you think. Making larger payments than are required may be reducing the amount of interest that you are being charged no matter how weirdly it is being presented on your account statements.
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Rukh O'Rorke
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Post by Rukh O'Rorke on May 29, 2019 12:53:51 GMT -5
Here's what happens.
Payment is 97.45 a month.
You send in extra 250 for shits and giggles.
You payment is recalculated and is now 96.23 a month.
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haapai
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Post by haapai on May 29, 2019 12:59:56 GMT -5
Has that happened multiple times or just once? Remember, they had to recalculate the minimum amount due when the interest rate changed.
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haapai
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Post by haapai on May 29, 2019 13:02:44 GMT -5
That payment amount of $96.23 sounds like you are on a ten-year repayment schedule.
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Rukh O'Rorke
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Post by Rukh O'Rorke on May 29, 2019 13:36:47 GMT -5
that isn't my minimum payment.
Just example numbers.
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haapai
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Post by haapai on May 29, 2019 14:26:45 GMT -5
Weird coincidence! $96.23 is almost exactly the number that PMT spits out with $8000 principal, 7.75% interest and 120 payments.
I think that the answer is not to use auto pay but to push money at them each month.
It sounds to me like payments in excess of the minimum amount due are being applied to principal, so it hardly matters that you do not have a box to tick.
I'd try sending them the level amount that you want to pay each month for a couple of months and see what happens. Can you set up those transactions in advance?
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Rukh O'Rorke
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Post by Rukh O'Rorke on May 29, 2019 14:31:00 GMT -5
When I called I ask what would happen with future extra payments and they said the recalculate payments rather than just carrying on with same payments
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haapai
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Post by haapai on May 29, 2019 15:03:39 GMT -5
How often does the interest rate on this loan potentially change? Can it change in any month, or only quarterly?
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Rukh O'Rorke
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Post by Rukh O'Rorke on May 29, 2019 15:21:41 GMT -5
That I'm not sure!!
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debthaven
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Post by debthaven on May 29, 2019 16:03:27 GMT -5
but that plays right into their hands, as you are paying interest on a larger balance for those months.
Perhaps ... but that's not something I'd be willing to do on a monthly basis, and you are a LOT busier than me.
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Rukh O'Rorke
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Post by Rukh O'Rorke on May 29, 2019 16:21:14 GMT -5
but that plays right into their hands, as you are paying interest on a larger balance for those months.Perhaps ... but that's not something I'd be willing to do on a monthly basis, and you are a LOT busier than me. True! I will wing it and see how it goes.
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