I don’t know when Sallie Mae started this, but I didn’t discover it until February. Previously if you made extra payments beyond your monthly amount due and you wanted it applied to specific loans, you had to make all of your payments by check with written instructions telling them how to apply the extra amounts. Not only is that a pain, but most people I’ve talked to say that Sallie Mae never, ever, ever applies the amount correctly.
Finally, they’ve decided to actually do something useful for those of us who are trying to get out of debt. Previously if you made extra payments online, Sallie Mae just used some fancy math to divide up all of the extra money between all of the loans. This is how it works now:
When you go to enter your online payment, if you enter an amount larger than what is due, it now takes you to a screen asking you if you want to apply the extra amount to your principal balance (yay!) or toward your next payment due (which is pointless, because you’re basically just giving them an interest free loan of your money for a month. Never do this!).
Once you select to apply it toward your principal balance, it then takes you to a screen that shows all of your loans along with their interest rates and tells you exactly how much extra money you are sending.
Then you can type in how much of the money you want to apply to each loan, or leave it blank and let Sallie Mae do something of their “magic” math. My recommendation is that you apply ALL of the extra money to the loan with the largest interest rate, because that’s where it will save you the most money. Unfortunately for me, my loan with the highest interest rate also has the highest balance, so it doesn’t feel like much of a gain, but I know it does the most good over the long run.
Now, this process is trickier for people (like me) who have their payments auto-debited from their account. Since you make the extra payment separate from the amount that is auto-debited, the system isn’t smart enough to recognize it as an extra payment. You have to submit the payment on the same day that your bill is due and the auto-debit transaction occurs and then it will recognize that the sum is in excess of the amount that’s due. It’s a pain to do, but once you get access to that screen, the payment will be processed the way you request.
Now that I have this tool to aid me in my debt payoff, I almost have some positive thoughts about Sallie Mae. Almost.