The Sallie Mae Trap

While attempting to make extra payments to principal it is clear that Sallie Mae cannot follow directions. They are currently at about at about a 70% fail rate in following the memo on the check that tell them how to apply the payment. I have to email them every time to have them correct the issue and they send me a response like this:

Thank you for your inquiry and for your business with Sallie Mae.

We received a payment in the amount of $370.00, which posted to your account effective June 18, 2009. We have reapplied this payment per your specific request.

A detailed email must be sent with each payment when you want a payment to be specifically applied.

If we may be of further assistance, please visit our Web site at www.salliemae.com.

Sincerely,

Customer Service

Why will they not just note that I want anything extra to be applied to my higher interest loan number? Is this the type of customer service that landed them the government contract?

My solution is going to be to automate Microsoft Outlook to send them an email every day requesting any extra from my payment not be held for the next bill and be applied to my high interest loan immediately. I know they will not be happy about it but hey if you go out of your way to make dealing with your company a pain in the ass I can do the same.

By the way this email address is where I send with questions and I usually get a response in a couple of days… ( good enough for government work right)

internet-bss@salliemae.com

I just got off the phone with Sallie Mae and it is almost a lost cause to try to understand their billing system. I always thought that your payment to a billing group was broken into correct proportions and applied to the loans that make up the group. My mistake.. apparently this is a pool of money where they can do whatever they feel like (and makes them the most money in the long run).

I have been making extra payments to my highest interest loan for almost 2 months now (10$ a week) and I take screenshots almost every day of the website status so I can catch their little "changes". Now what I am seeing is that because I am making these extra payments on that loan  when it comes time to make my big monthly payment they will not apply a proper amount to this loan. In the past every month this loan would receive 18-20$ (split between interest and maybe interest if I am lucky). Now this month the accrued interest on this loan is almost nothing and the payment was cut from ~20$  to 2.32$ the.. exact amount of accrued interest. This means that they have robbed me of about 17$ that would have gone to my principal.

They really did not have an explanation for how this payment conveniently got dropped to only cover interest. to sum it up they will apply your payments however they see fit and if it is in their benefit to apply nothing to principal on a higher interest loan then they will do whatever they can to have that happen. I requested that all extra money is applied to this one loan no matter what in an email… I hope they can handle that.

Sallie Mae is counting on you not  to keep an eye on what they are doing. My advice is to watch them very close.

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).