Consumer complaint received 2020-01-29
Company: AES/PHEAA
State: MA
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 applied for a Direct Parent Plus federal student loan to cover my son 's XXXX tuition expenses for the Fall XXXX and Spring XXXX semesters. The loan was disclosures indicated a fixed rate of 7.21 % with a principal of {$63000.00}, and an expected payoff date of XX/XX/XXXX ( a 10 year repayment period ). The loan funds were disbursed directly to my son 's university, by FedLoan Servicing : {$31000.00} on XX/XX/XXXX and {$31000.00} on XX/XX/XXXX. See enclosed documentation for supporting information downloaded from MyFedLoan. 

The loan has always been on a " standard '' repayment plan ; no forbearance or any changes to payment terms. I started making monthly payments on XX/XX/XXXX. All my payments to date have been for an amount greater than the required minimum payment of {$760.00}. As you'll see in the supporting documentation, I typically paid $ 800-1,000 each month. I only made one payment for the minimum required amount, the first payment on XX/XX/XXXX. I never missed a payment nor did I ever make a payment for less than the required minimum payment amount. 

Last month, on XX/XX/XXXX, I made a large payment for {$13000.00} in an effort to reduce my principal and accelerate repayment. My expectation was that the reduced principal, {$16000.00} as of today ( XX/XX/XXXX ), would translate into either lower required minimum monthly payments or an earlier payoff date. I was surprised to find out, when I called FedLoan on XX/XX/XXXX, that my monthly minimum required payment and the payoff date remained the same! And, the service representative indicated that I was now in a " pay ahead '' status. She explained that my additional payments, including the large one on XX/XX/XXXX, were applied to future payments. So, I asked why that would not mean that the loan would be paid off sooner than XX/XX/XXXX. She explained that I still had to make over 30 payments, an additional {$22000.00}. I have already paid a total of {$65000.00}. If I make those additional 30 payments, I will have paid {$88000.00} ( or more, as I do not trust FedLoan and it's calculations ). 

I do not understand how a FIXED loan on {$63000.00} turns into a total paid of {$88000.00} when this 10 year loan is being paid ahead of schedule by a matter of years. The interest amount paid on this loan should have been {$4500.00}, not {$22000.00} or more! That's more than 35 % interest. FedLoan did ( or would ) not provide me a total expected payment amount at the end of the loan. It was not provided to me over the phone, not on their website, and not in their disclosures in the original promissory note. Nowhere along the path of this loan experience was I informed, as the borrowing consumer financially responsible for repayment, that I would be paying more than {$22000.00} over and above the principal. FedLoan uses a daily interest calculation, but nowhere do they disclose the significant financial cost and impact it has on the consumer 's repayment obligation. In fact, indicating it's a fixed rate loan is deceptive without additional disclosures showing at least the standard repayment scenario and what the total cost of the loan will be to the consumer. 

The recent payment history I downloaded from MyFedLoan shows that I have already paid {$18000.00} in interest and {$47000.00} in principal. I have a {$16000.00} balance remaining on the loan. If I paid that off today, I would have paid a total of {$81000.00} ( 28 % more than the original loan amount ). Does that seem right on a loan advertised at 7.21 % fixed rate? If I continue making payments until what FedLoan claims to still be my payoff date ( XX/XX/XXXX ), how much total interest will I have paid? At this rate, I will likely end up paying almost 50 % interest, or close to double the original loan amount. 

This is an outrage, outright robbery of the consumer through deceptive practices. As a consumer, I would never have taken this loan had it been clearly disclosed to me how the presumably fixed interest rate would be applied by showing me what I would be paying in total over the life of the loan. These disclosures are clear on credit card statements, they are clear on mortgage origination documents, so, why are they not required and clear on Federal Student loans owned by the U.S. Department of Education? Why does FedLoan collect and retain funds from borrowers that are excessively higher than the rates advertised for the loan? How do I get my money back?

Company response to consumer: Closed with explanation