Consumer complaint received 2019-09-30
Company: GREAT LAKES
State: FL
Product: Student loan
Sub-product: Federal student loan servicing
Issue: Dealing with your lender or servicer
Sub-issue: Trouble with how payments are being handled

Complaint:
I'm writing on behalf of my wife, as I've been helping her pay back her student loans and believe additional/one-time payments are being misapplied by the loan servicer, both for Federal and Private Loans. I believe it is similar to the issues previously dealt with regarding XXXX XXXX where it was making its own elections on how to apply payments, allocations, etc, and not informing borrowers they should decide payment allocation. 

First and foremost, Great Lakes opted to provide three different loan " groupings '' of the loans, one a " group '' of federal loans, the other two, I  believe were groupings of private loans. These " groups '' are indiscriminate of which school the loans were related to, or to interest rate. 

When I initially began helping her pay her loans, she had auto-pay set up where she would pay the monthly minimum ( which I don't believe even covered the interest, but that's not the subject of this complaint ), and I would make an additional monthly payment on her behalf trying to attack higher interest loans. 

I AM aware that the first payment of the month on a loan is attributed first towards interest, and then if the interest is satisfied, towards any additional principal. I do not dispute this. 

BUT, because of Great Lakes random " grouping, '' it treats each " group '' of loans as a single loan, EVEN IF I DESIGNATE A PAYMENT TO GO TOWARDS ONE INDIVIDUAL LOAN. This results in misapplication of my specified payment, attributing the overpayment ( or additional payment, extra principal, however you want to title it ) as being squandered towards the interest of loans with lower interest rates. Additionally, as part of this complaint, in adding to the confusion, Great Lakes does not permit a borrower make a payment toward one loan, but allows a payment be made only to a group, with assigned percentages, requiring the buyer to either make individual payments assigned 100 % to the individual loan within the group, or requiring multiple percentages be calculated, obfuscating the system. 

An example : On XX/XX/2019, I made an additional payment of {$9800.00} attempting to pay off one of the loans with the highest interest. This amount was slightly more than the balance to make sure over the 2-3 days it took to process, it covered additional interest. I logged into the system, selected the loan " group, '' designated the payment should be applied with an " allotment '' of 100 % to sub-loan " XXXX, '' and despite the extra payment to cover the interest, the remaining balance on the loan was still $ XXXX. Why? I logged in and looked at the payment, and instead of breaking it down as specified, 100 % to loan " XXXX, '' it took the payment and applied it to all sub-loans in the group as follows : XXXX {$16.00} to interest XXXX {$13.00} to interest XXXX {$7800.00} to principal, XXXX to interest XXXX XXXX to interest XXXX XXXX to interest XXXX XXXX to interest XXXX XXXX to interest XXXX XXXX to interest XXXX XXXX to interest XXXX XXXX to interest The same happened with multiple other payments. 

I contacted Great Lakes to discuss this with them. They cited the MPNs and " Federal Law '' indicating that the first payment of a month goes towards interest for a loan. 

Again, I do not disagree that when a payment is made, it first goes towards interest on that loan, but when I log in and specify a payment specifically to one sub-loan, and Great Lakes treats the payment as a payment towards a group of loans, that is wholly improper. 

Great Lakes does not get to arbitrarily " group '' loans to syphon additional payments away from the higher interest loans and distribute it to their discretion. Doing so, and disregarding a borrower 's intention to pay toward an individual loan as opposed to a group of loans costs borrowers hundreds and thousands of dollars by not allowing them to fully attack their higher interest loans first. 

I had multiple follow ups with Great Lakes and they indicated they " could '' delineate the loans, but that would complicate my credit report. That is an unacceptable response, and an unacceptable reason to ignore the designations of the borrower paying back loans in good faith.

Company public response: Company believes it acted appropriately as authorized by contract or law
Company response to consumer: Closed with explanation