Sallie Mae negligently misapplying prepayments on a continual basis

[karbowski]

Hi,

I am in one of the more unique situations where I am having trouble sending in prepayment checks for my highest interest rate student loan and having the amount applied to the correct loan by Sallie Mae. These checks are accompanied by a letter explicitly stating that I wish to have the entire prepayment amount of Check ### applied to the accrued interest and outstanding principal balance of "Loan 1-04".

Their website states as directions for prepayments:
"Note: Please be sure to write your account number on the check or money order. If you have more than one loan, enclose specific instructions for applying the funds."

Each check and letter has been copied and the copies have been saved in my personal files every time. Each check I send states the account number and the loan number I wish it to be applied to in the memo section. My problem lies with Sallie Mae's application of these funds.

They choose to ignore the letter (throw it away, use it as a gum wrapper--I don't know) and apply the prepayment across all of the 9 seperate student loans I have currently serviced by their company instead of the one I had directed them to apply it to. I have some private ie. Student Signature, some FFELP loans--regardless of type, the 8 others have MUCH lower interest rates.

This has happened three times in the past 5-6 months. If I had not caught it each of the three times, my prepayments to avoid accruing interest at the higher rate would have been in vain. Is there a way to file a legal complaint against the company for this utter disregard of the penalty free prepayment process in order to collect more interest from it's debtors? I'm sure there are many other college graduates in my situation.

I am also not sure which financial regulatory authority their servicing business would fall under. Does anyone happen to know which authority it would be so I may contact them directly?

Thank you for your time and thoughts!
LK

 

[mightymoose]

If I understand correctly, they have already corrected the problem for your specific case, however you are concerned about the problem recurring, or that others may be having the same problem?

I believe the best you can do is stay on top of it as you have. Keep in contact with them and see if you can work out a way to avoid the problem... although it sounds as if you have done everything correctly.

It is very possible that when your mail is received the check is immediately separated from the letter, and in this case the instructions are lost.

Is there a way for you to pay online so that you can direct your payment into the specific account that you choose?

 

[karbowski]

Unfortunately, this is the only way to remit prepayments to the company for a specific loan within a billing group. I am using their exact guidelines, yet each time (honestly 3 times in 5 months is OUTRAGEOUS for a company's service record) I potentially lose many thousands of dollars worth of interest savings over the life of the loan. When you start with $110,000 in student loans and are able to prepay $55,000 worth within 2.5 years of graduation, it turns into tens of thousands of dollars in interest savings over the life of loans that are 10-15 year standard repayment plans. This can all be derailed by their incompetent, if not grossly negligent staff, dismissing the details of how to apply the funds I methodically type, copy, then mail to their payment processing center in Pennsylvania according to their directions. I see a problem with this process, but I guess it is not a legal infraction.

Thank you for your advice! I will go to the BBB instead and copy the director of servicing operations at Sallie Mae.

 

[mightymoose]

I think the more you catch this problem and report it to them the easier it will be to correct the matter each time they screw it up.
If they refuse to change the way the money was distributed then you would have better grounds to take action.