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She Tried to Payoff Her Student Loans Early, and Almost Lost it All

Milad Hassibi July 9, 2018

After almost 20 years of repaying student loans, Jessika Gonsalvez finally saw the light at the end of the road. Her elderly aunt offered to help her finally eliminate her pesky student debt. So the kindergarten teacher from Santee, California sent a check for $6,700 to her student loan provider.

Weeks flew by and still, no change was made to her balance. The payment still didn’t show up on her account statement.

“It was a very upsetting and nerve-racking time”, says the now 43-year-old Gonsalvez.

That’s when she finally decided to call. At first, her representative told her that she had mailed the check to the loan providers old address. “They tried to tell me that I had mailed the check to the wrong address – but that never happened,” she said.

When she went to her bank, she saw that the check for $6,700 had been cleared and the money was gone from her account. Gonsalvez said that the loan provider would refund her within four to eight weeks, but four months came by and the money still was not returned.

“It turned into months of going back and forth to finally get my money back,” Gonsalvez said. Eight months after she had mailed the check, she was finally refunded the $6,700. But in the meantime, interest accrued on her account and she fell behind on her payments during those eight months.

Making additional payments on your student loans is actually a great way to reduce the overall interest you pay on your loan. It can also help you get freedom from student loans years earlier. However, paying off student loans early can be a headache for many consumers.

If you want to avoid any future headaches with paying off your student loans, here are some top tips:

Instruct and be Clear

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First and foremost, if you are mailing a check to your loan servicer, make sure that it’s going to the right address. Many loan providers have different PO boxes for different types of loans. Often times, consumers accidentally send their checks to the wrong addresses or loan servicers.

When you are mailing the letter, be sure to include specific instructions that this check is an extra payment, not a form of an early payment.

If you do not include instructions on how the loan servicer should handle your payment, you could lose all the benefits of paying down your principal (reduced interest and earlier payoff date).

In the check memo, make sure to include that this check/payment is to be applied to your balance. If you make your payments online, there should be an area to write out a note. If you want to pay off a high-interest loan first (highly recommended), provide the loan ID number on the checks memo line.

If more than 10 days go by with no change to your account, call your loan provider.

Time Your Payments

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When it comes to student loans, a federal law requires that all student loan payments are applied to any fees and/or collection charges first, then to interest, and lastly to the principal of the student loan.

To optimize your extra payments, send your extra payment a 3-5 days after you make your regular payment. The regular payment will help to cover the interest portion for that month while the extra payment all goes to principal.

Final Note

Making extra payments on your student loans is a great way to save on interest expense. When it comes to making extra payments, be sure to be as detailed as possible. By timing your payments in an appropriate manner, you can pay less overall for your student loans.

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