A while back I decided that I would be sending an extra 10$ and assign this extra payment to 1 loan (specified in the memo on the check per Sallie Mae instructions). This one private loan is for a smaller amount but in order to milk me the hardest and longest the interest rate is jacked up to 13.75% where my other private loans are 8.75%. Now the first thing you learn about getting out of debt is you target the highest interest rate first. So sometimes they apply it correctly other times they don’t. Below is a screenshot of the correct payment sent for $10 of witch $2.30 is applied to principal and $7.70 is assigned to interest. This payment is simple and exactly what I would expect when sending an extra payment to one loan as I specified.
Now this week (and earlier weeks also now that I look closer) my payment is applied completely different. the 10$ payment was split across all loans for a completely different result.
Below is the intended loan and $.50 was applied to it (all interest).
Next private loan come up with $2.44 (all interest)
The last private loan come up with $1.86 (all interest)
Then my two government loans getting $2.44 and $2.66 respectively (interest of course).
So the result is that each extra payment is split up in such a way that it is applied to my lower interest loans and all to interest none to principal instead of the intended payment to the one high interest loan.
Is this on purpose? I would have to say so because of how they apply payments. Their default is to do whatever will keep you in debt longer and generate more profits (such as paying extra and Sallie just applies it to the next payment).
This happened to me too, except they applies 6 months of payments to a single loan (I have 2 loan accounts), thereby leaving one account in default status. I found out about this by getting a call from a collection agency. When I started questioning the allocation by reference to their website, they shut me out of online access to my account.