Back in 2011 I consolidated two VERY large loans – a direct subsidized and a direct unsubsidized. The unsubsidized obviously grows at a much more ridiculous rate than the sub loan does. I just recently went back to school to get my MBA and so my entire consolidated loan went on deferment. Obviously however I don’t want to be killed by the interest that piles up while I’m in school so I’ve continued to pay on it since I’m still working full time. However, the subsidized loan is not accruing interest currently while the unsubsidized is.
Am I allowed to call the lender (FedLoan Servicing) and dictate how my payment is applied when I pay? I am lucky enough to be able to pay more than the minimum so I do, but I do not like at all how they choose to split my payment up and as a result, less gets paid to the unsubsidized loan which means more interest for me to pay down the road.
If I’m not allowed to dictate how may payment is applied. are their better options for me moving my loans to somewhere that I can have a little more control over them? I do like being able to take advantage of not paying interest on one of the 2 consolidated loans while I’m in school, but I feel like I’m being raked over the coals with the other one.
May 3, 2014
I’m a little confused by your question, so I’ll start with my understanding, if I’m wrong, please correct me.
It sounds like you had many loans that were consolidated through federal direct student loan consolidation. The end result would have been one unsubsidized consolidated loan, and the other subsidized.
If that is the case, you can instruct your lender exactly how you want your extra payment applied. Putting your payments towards the unsubsidized loans is a great idea. I’d suggest calling your lender to get the exact process that you need to go through to make sure they process your payments correctly. (Side note: part of Obama’s big student loan announcement from yesterday changes this so that extra payments would automatically go towards the high interest loan… hasn’t happened yet, but hopefully it will in the near future… more on it here: https://studentloansherpa.com/obama-unveils-student-aid-bill-rights/ )
However, if you had loans A, B, C and D, then consolidated them all into loan E, your payments on loan E cannot be specified towards any of the underlying loans… it is just one new loan.
Hopefully this helps, if you still have questions, please let me know.
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