There are many ways in which a student loan payment can be applied to a borrower’s account. In fact, there is a ton of strategy that goes into managing an extra payment.
Typically your money first pays off the late fees, then existing interest, then it counts towards the principal balance of your loan. Paying extra money may lower the minimum payment the next month, or it may not change things. Put simply, just sending a check is not enough. You have to make sure your funds were processed correctly.
This week we received an email from a reader who had issues with how Navient applied his student loan payment.
He writes:
Basically, I was granted an IBR at the value of 0$ for 12 months. As the IBR was approved my unemployment deferment was ended and the IBR started. However, there were 91$ in late fees that had to be paid by Mar 22 so I called Navient and made the payment on time over the phone, specifying I wanted this payment to go to late fees.
Next time I check my account, only 2/3 of the 91$ went towards late fees and 1/3 towards unpaid interest so another 1/3 of the late fees is now due before April 22nd! I called back but they didn’t want to cooperate. In fact, I even asked for a letter to be sent testifying how they decided to apply the payment and they refused to send it.
How do you suggest I proceed? Should I write them a letter and threaten legal action? Is there a government body that can help me straighten them out?
A Few Initial Thoughts
Threatening legal action is probably an act of last resort. It is also something that you should only do if you are willing to back it up with a lawsuit. Most people think threatening to hire a lawyer will get results, but at a company like Navient, they probably hear these threats all of the time. Furthermore, this is a relatively straightforward issue.
Having dealt with loan servicers for a number of years on my loans, I’ve often found the best results come from playing nice with them.
Navient may be a company that you justifiably hold in low regard, but the person on the other end of the phone could be a very pleasant individual just trying to earn a paycheck. If you are kind over the phone, that person will be far more likely to want to help you.
Requesting a Payment Correction
Typically, if the borrower has an option for how the payment is applied, and there is a mistake, a simple correction can be made. In this case, it is very surprising that they even applied the payment towards interest instead of the late fees. It is even more surprising that they could not make this change per your request.
In a situation like this, the first call should definitely be to customer service. If you get a negative response, asking why is a powerful question.
- Does the service rep just not have the authority to make the change?
- Is there a form that needs to be filled out first?
- Is there a term of the loan at issue?
Navient can’t just do what they please, so if you ask why and get to the bottom of the issue, you may find your solution as well.
Escalating Things by Filing a Complaint
If working directly with Navient customer service does not get you anywhere, it still isn’t time to hire a lawyer. There are a few other steps that can be taken to resolve the issue.
- Call the Navient/Sallie Mae Customer Advocate – These people are employed by Navient/Sallie Mae but given more authority to address issues. They are employed to be problem fixers. If you can explain what this issue is and how to fix it, these advocates can potentially get it done.
- File a complaint with The Consumer Protection Bureau – The CFPB is a government agency tasked with protecting consumers. If you file a student loan lender complaint, the lender has to respond. Navient gets huge contracts from the government, so they have a huge incentive to participate in the process and find a solution.
- As a last resort, the Department of Education has an ombudsman tasked with addressing student loan issues. This again is another resource to consider trying.
The Bottom Line
Dealing with a payment applied incorrectly can be a monster headache.
While getting angry or threatening to file a lawsuit might make you feel better, Navient probably knows you won’t be hiring an attorney over a $30 issue.
There are free alternatives to get things addressed if you can’t solve things directly with Navient, and they may even be more effective.
Hello, I broke my payment into 4 equal payments and schedule one payment every week of the year. This helps because they can’t sit on a payment made on Thursdays applying it on the following week while charging interest on Saturday and Sunday. Here’s the issue. An extra 10¢ goes towards the principle every week, and some times it’s 09¢. The amortization principle should take effect.. the amount of interest paid should slowly decrease and never increase so long as the payments are made on time and at the same rate. It is likely they are doing this to millions of borrowers over several weeks months and years. What can be done about this if anything?
This is a fascinating question. My first thought is that it is critical that you are clear with Navient about how you want these “extra” payments processed. Some lenders will treat the payments as prepayments and apply the extra money towards future bills instead of immediately knocking down the principal balance.
Shifting to your specific question, one explanation might be the fact that months and weeks don’t overlap evenly. Some months will have 4 weekly payments while others will have 5. Depending on how they are handling the extra money paid, this could explain your issue.
Either way, your point is completely legitimate, and they should be able to explain the discrepancy to you. If they cannot, it might be time to file a complaint.
Navient is notorious for not posting payments correctly. I paid for 3 months, Navient cashed the the check, now Navient is sending me past due notice when I am paid through the end of month. Spoke to someone at Navient and all they did was beat around the bush, did not know what they were doing at all, delaying correcting my payment. Then Navient rep told me I could not pay in advance when clearly on their monthly statement states you must send a note on how to apply – which I did outlining the specific months payment was covering. The gal then told me they didn’t not apply the payment as I cannot pay in advance – CLEARLY UNTRUE. I will be submitting a formal complaint to CFPB as well as my legislators. No telling how many others this is happening to. I will also be demanding a “full accounting” of my Navient account. This is an extremely irresponsible company that needs to be banned .
You can absolutely pay ahead on your student loans… it’s awful they told you otherwise.
Good luck with your CFPB complaint and let us know how it goes!
I payed my student loan months ahead in large sums. Navient applied all the money for 7 months of overpayments totaling $8.3K on interest and none to the balance ($32K). Customer service insisted it is not in error.
That definitely sounds wrong. There are ways to escalate the issue within Naviet: https://studentloansherpa.com/resolving-complaints-navient-sallie-mae/
If that doesn’t work, I’d suggest filing a compliant with the Consumer Financial Protection Bureau.