They want to bleed you dry. Don’t let them.
This year has been a real financial shit-show for me. I left my stable?—?but terrible?—?freelance job at a television show to embark on a less stable career as a freelance writer. MOM, I PROMISE IT’S GOING GREAT. But no matter how sad my checking account looked, I still made an effort to pay more than the minimum amount required on my student loans. Which is why it really pissed me off to log on to my provider’s website every month, only to discover that my overall total was barely declining. And this week, I finally found out why.
When you overpay your loans, it’s generally because you want to get rid of them faster, in the hopes of accruing less interest. But according to a recent article in the Washington Post, that’s not always what happens.
When you send in more than the minimum payment, your provider can take that extra money and decide how to spend it. Instead of applying it to your principal total, they can lower your next month’s payment, make your repayment period longer and direct the extra money towards your future payments. And they can do all of this without telling you, the consumer.
This process is called redisclosure and it can happen for a number of reasons:
- If your loans are transferred from one provider to another?—?which can happen often and without your consent.
2. If your student loan company makes changes to their computer systems.
3. If you prepay one month. Should you do this, your service provider can put you on a “payment holiday,” which means you won’t get a bill for several months, even if you want to continue paying and getting ahead of your loans.
Essentially, what your providers are trying to do is keep you from ever eradicating your debt. By lowering your monthly payments, they increase the amount of time you’re on the hook for the loan, which increases the amount of interest you’ll have to pay back. And if you’re not carefully checking your balance every month, or if you’re depending on automatic withdrawals to do the work for you, it becomes very easy for companies to take advantage of you.
Having read all of this, you may be inclined to reach for the nearest match so you can BURN IT ALL DOWN. Instead, use that righteous rage to call up your student loan company and tell them what’s up. If they’ve lowered your monthly payments, ask them to reset them. If you don’t want to give up your automatic withdrawals, you can tell your provider exactly how you want your payments distributed across your loans, i.e. directing the majority of your repayment towards your loans with the highest interest rates.
And you have to call and speak to an actual person because some servicers do not allow their customers to manage or adjust their payment amounts online or through their automated phone systems. Companies hope that by making this process as difficult as possible, they can deter you from taking the steps to become debt-free. Don’t let them. Student loan debt is big business—so big, in fact, that the federal government can’t even keep track of how much Americans owe. Be vigilant, be assertive and when all that fails, burn it down.