Consumer complaint received 2024-03-14
Product: Student loan — Federal student loan servicing
Issue: Dealing with your lender or servicer — Trouble with how payments are being handled
Company: Nelnet, Inc. (MD)

Nelnet has made repaying my federal student loans difficult by giving me misleading information, which has led to unnecessary interest accrual and capitalization. 

To start, I am a first generation college student. In my XXXX while I was in school, I was only working part time and could not make my minimum payments on my loans, so I applied and was approved for in-school deferment. I didnt realize they would continue to accrue interest. So my loans ballooned. Once I realized, I set up interest payments to prevent the loan from growing any more- I couldnt afford to pay more than that. That should not be allowed to happen to students actively in school in the first place. But I have since learned from my mistakes and have been working hard towards paying off my debt. 

I did my research before the end of the COVID forbearance, and found on XXXX website that if I set up auto-pay, I could get a 0.25 % rate reduction. However, I was planning to pay more than the minimum amount and there was no way on the online portal for me to dictate where that extra amount would go. So for the first few months, I paid manually instead of using auto-pay. And in those few months, my amount went down really quickly. But it was burdensome. I decided to call and ask how the auto-pay would allocate funds. The representative told me it would do it by allocating the extra amounts to the highest interest rate automatically- which sounded great to me. I would have done it similarly myself. 

I set up auto-pay starting in XXXX. Come XXXX, I find that several of my loans had not been paid. So I called customer service. She had told me that auto-pay wasn't paying several of my loans because the loan due dates had advanced due to the extra, manual payments I was making. She told me that she could reset the due dates for XXXX and then the auto-pay would apply the way its supposed to. 

Now its XXXX, and several of my due dates are still set for later this year, so auto-pay is not allocating my payment to those loans, even though they continue to accrue interest. And in one case, the due date was adjusted, but the payment towards it was less than the amount of interest that loan accrues. As a result my loans have accrued over {$400.00} in interest since I signed up for auto-pay and stopped paying manually, even though I've been paying more than the minimum amount. 

As an example, of the {$650.00} I pay monthly, only {$30.00} went to my largest loan. The original balance of the loan is {$20000.00}. The current outstanding balance is {$20000.00}. The interest rate is 5.590 %. The balance had been declining when I was paying manually. 

I called to figure out why only {$30.00} of my {$650.00} went to my largest loan. The representative told me that even though the due date was brought to XXXX, auto-pay will default to only paying the amount necessary to avoid being delinquent since it has had extra, advanced payments. 

In all of the payments Ive made, I always click Do not advance my due date - so they should not have been advancing. But even so, the due date was brought back to XXXX and yet when I set up auto-pay, the minimum payment isn't even being made.

For that one loan, the original balance was {$20000.00}. I had the balance going down when I was paying manually. But since I set the auto-pay, the balance is now {$20000.00}. I dont understand how this is legal. 

If I were less diligent than I am now, I would have set auto-pay and not logged back on to check. And an unnecessary amount of interest would continue to accrue and my largest loan balance would continue to rise, despite paying over {$50.00} extra a month to my debt. 

I asked the representative if I could dictate how much I can pay to each loan and he said no. That I can use the Special Payment Instructions tab. These include Standard allocation ( Recommended ), Apply excess to all groups proportionally, Apply excess starting with the lowest-balance loan, and Apply excess by percentage. The Apply excess by percentage in theory could be a good way to achieve what I am trying to. But when I pull that up, it is just the loan number, a box for me to type in the percentage, the loan type, the principal balance, and the interest rate. It doesnt show much how much the minimum payment is or how much the extra would be. Im pretty math savvy and I dont find this reasonable to use at all. 

So now Im stuck with either continuing auto-pay to get the 0.25 % rate decrease and letting the loan company decide how to allocate it- which my history with them has shown that they wont pay the minimum on the loans and it will accrue hundreds of dollars in interest, or I can manually pay, forgoing the 0.25 % decrease and be burdened by needing to manually pay monthly. 

I would like to add that the original balance of my loan was {$44000.00}. To date ( XX/XX/year> ) since having federal student loans, I have paid {$21000.00}. {$11000.00} has gone to principal and {$10000.00} has gone to interest. And yet, my current outstanding balance at {$43000.00}. 

So despite having paid nearly {$22000.00}, my balance has only gone down by about {$1200.00}. 

I feel like my federal student loan servicer is a loan shark. And Im sick of needing to be diligently checking my accounts all the time to make sure the money is actually going towards where they say it will.