#student loans payment
How Payments Are Applied
Did you know there are rules in your student loan agreement we’re required to follow when we apply payments to interest, late fees (if any), and your unpaid balance? This means it’s not possible for you to direct a payment to be applied entirely to the unpaid balance of a loan. For all loans other than federal loans with income-driven repayment (IDR) plans, payments must be applied first to late fees, if any, then interest, and finally the unpaid balance. For federal loans with an IDR plan, payments must be applied first to interest, then late fees, and finally the unpaid balance.
However, when it comes to extra payment amounts (see examples below), after all interest and late fees due have been satisfied, we automatically apply the extra amount to the unpaid balance on the loan with the highest interest rate (if there are multiple loans in your account). If you don’t want the extra payment amount to be applied this way, contact us. If you, instead, want an extra payment amount to be applied to a specific loan, you must provide us with the loan’s account number and interest rate. If multiple loans in the account have the same interest rate, and you want an extra payment amount applied to one and not the other, please contact us to ensure the payment is applied to the loan you want.
This topic goes into detail about how we apply payments to an account and your options to have payments applied differently.
What is an Account?
Most students have multiple loans one or more for each year of school. To reduce the number of payments you have to make each month, we group loans into accounts based on the type of loan and the lender .
- If you have four Stafford loans from the same lender, you’ll have a single account with four loans and one payment. The interest rate on loans in an account can be different.
- Or, if you have four Stafford loans from two different lenders, you’ll have two accounts with loans in each.
- Or, if you have a private loan and a Stafford loan, each will have their own account.
- An account can also have a single loan in it.
In addition, loans owned by ED are grouped by the type of loan and whether they were originated by ED or a private lender. This means you could have two accounts with loans that are held by ED. For example, if you have Stafford loans that were originated by a private lender and sold to ED, they are identified with one account number. And, if you have Stafford loans that were originated by ED, they are identified with a different account number.
Each account has a separate payment amount that is applied to the loans in the account. If you have multiple accounts and send a check as payment, it’s important for you to identify to which account the payment should be applied. If we can’t determine to which account a payment should be applied, we will apply it pro rata proportionately determined according to its share of the whole to all of your accounts.
If you’re still in school at least half-time or in your grace period, you’re not required to make monthly student loan payments. But if you’re able to, that’s great! It’ll save you money in the long run.
Since you’re not yet in the loan status called “repayment” and you don’t have an active Payment Schedule and Disclosure (PSD), there are different factors that determine how your payment is applied.