Consumer complaint received 2024-09-13
Product: Student loan — Federal student loan servicing
Issue: Dealing with your lender or servicer — Trouble with how payments are being handled
Company: MOHELA (CA)

I currently have two separate consolidated XXXX XXXX XXXX being administered by Mohela. Both are XXXX separate consolidated loans. One is in the amount of about {$11000.00} ( Loan XXXX ), and the other is in the amount of about {$90000.00} ( Loan XXXX ). Back in XX/XX/XXXX, in an attempt to get ahead on payments, I wanted to make a principal-only payment to XXXX XXXX. I attempted to do an online payment allocating a {$1000.00} principal-only payment to XXXX XXXX. However, when attempting to do an online payment, the online payment screen would automatically adjust the {$1000.00} inputted amount, and allocate something like {$130.00} to XXXX XXXX, and the balance of about {$860.00} to XXXX XXXX. The online payment screen also did NOT have an option to pay principal only. 

Instead of paying online, I called Mohela directly, and attempted to make a payment over the phone. They also were unable to allocate a specific amount only to XXXX XXXX, and confirmed that they could not do a principal-only payment. So they instructed me to send a check, with written instructions about how payment should be allocated. I sent a check which contained a memo on the check about how the payment should be directed- to XXXX XXXX, and for principal only. I also provided a cover letter with clear instructions that {$1000.00} should be applied to XXXX XXXX and to principal only. 

A few days after the check was sent and submitted, the online transaction screen allocated the {$1000.00} payment to BOTH loans, and Loan XXXX was paid in the amount of something like {$170.00} total ( allocated between principal AND interest ). The vast majority of the payment ( {$820.00} ) was distributed to XXXX XXXX. In order to remedy the problem, I had to call Mohela, where Mohela had to manually reallocate the amount of payment to XXXX XXXX, and the payment still could NOT be allocated to principal only. The customer service agent advised me that the change would be reflected on my account in XXXX business days. The change on the account eventually was adjusted, but it took almost 4 months to adjust the error. 

Again, today ( XX/XX/XXXX ), in an attempt to get ahead on payments for XXXX XXXX, I attempted to do an additional {$1000.00} payment, principal only to XXXX XXXX. Similarly, the online screen would not allow me to allocate payment to XXXX XXXX principal only ; so I attempted to call to pay over the phone, but the customer service agent was again unable to allocate a payment to XXXX XXXX only. She instructed me to send a check with instructions, but I informed her that my previous attempt at payment with instructions was ignored, and that it took over 4 months to correct the error. 

Because of this, I have opted to not make an additional payment, as the process is terribly burdensome, and takes too long to correct. 

I feel that this error is predatory, as Mohela may be fraudulently obtaining payments from unknowing payers who may want to get ahead, but Mohela is unfairly allocating extra payments to interest and/or a larger loan so that it prolongs the life of a loan for payers who are making extra payments. This unfairly prolongs payers repayment schedules, and Mohela profits because it forces repayers to only pay interest or larger loans, while principal remains untouched. This is a predatory practice, as debtors ( particularly debtors who are current in payment, and not in arrears like myself ), have the right to pay principal only and/or whatever loan they see fit. In other words, I have a right to know where my money is going. I hope that the CFPB can remedy this problem and force Mohela to comply with CFPB regulations ( if any ) and/or correct a practice that is likely harming honest and current debtors.