Consumer complaint received 2017-01-03
Product: Student loan — Federal student loan servicing
Issue: Dealing with my lender or servicer — Trouble with how payments are handled
Company: GREAT LAKES (IL)

The company, which bought my federal student loans, is imposing hidden prepayment penalties on my extra monthly payments meant to pay off my student loans early. It is my understanding that prepayment penalties are illegal under the 2008 Higher Education Opportunity Act. The prepayment penalty has two parts to it. The first is that the date I 'm allowed to make an extra payment is in effect limited solely to my actual monthly payment due date. Specifically, if I make a regular monthly payment and then make an extra payment after the due date of my regular monthly payment, the company does not count my extra payment as " excess, '' but counts it as my next monthly payment despite the fact that I already have an automatically scheduled monthly payment for the next month. This is important because if it does not count as an " excess '' payment, then I 'm not allowed to direct the entire excess amount to my largest loan with the biggest interest, but rather the company gets to distribute the payment among all the loans ( like the smaller ones with less interest ). By doing so, the company charges me more interest in the long-run because I am not allowed to put the entire amount of my excess payment toward my largest loan with the largest interest and therefore end up paying it off longer and paying the company more interest than I otherwise would have. I have never received any written notice as to this limitation and only found out after numerous calls to the company connected to the fact that my extra monthly payments were not directed to my biggest loans with the most interest, but distributed ( contrary to my directions ) through all my student loans. To this day, I 'm still unable to find the clause explaining that this is how my extra payments should be treated and the company has not provided me with anything in writing as to this rule regardless of my inquiries. Further, the company employees have advised me that the only thing I can do, not to incur the extra interest for prepayment this way, is to make my extra payments on the same date as my regular monthly payment. This brings me to the second part of the prepayment penalty. Specifically, several times a year, my payment date falls on a weekend or holiday which is a non-working banking day. This means that even when I schedule my extra payment with my regular monthly payment, it does not get processed as an extra payment, but as the regular payment for the next month as it is considered as paid on the next working business day ( PS my automatic monthly payment gets processed on the non-working banking day retroactively, so the regular monthly payment is processed just fine ). Due to this practice, this also means that the company gets an extra day or two of interest out of me, which I otherwise would not have paid. In other words, on months where my payment date falls on a weekend or holiday, I am not allowed to make any extra monthly payments on my loans, otherwise I end up paying more interest as a penalty. The company has given me no answer so to this issue and advised me to continue making my monthly payments with my regular monthly payment and on no other days so the extra interest " penalty '' does not materialize. 
Finally, I would like to clarify that my extra monthly payments tend to be significantly larger than my regular monthly payments. Therefore, when I have made them prior to or after my scheduled monthly payment, they are counted as a " regular '' monthly payment and the company distributes them in a way that makes it collect more interest from me, despite my instructions to the contrary. Then when my lesser regular monthly payment is made, they treat that as an " extra '' payment, which they default to be distributed equally among all loans and not fully toward the biggest one with the biggest interest, so I still end up paying more interest than I otherwise would have.