Consumer complaint received 2016-08-10
Product: Student loan — Federal student loan servicing
Issue: Dealing with my lender or servicer — Trouble with how payments are handled
Company: Nelnet, Inc. (CO)

I am on a Pay As You Earn Repayment plan and my monthly payment is {$160.00} due on the XXXX of every month. I am enrolled in Nelnet 's auto debit. I consolidated my student loans into XXXX loan and was left with approx. {$300.00} in accrued interest. My monthly payment of {$160.00} only covers 1 month of interest and nothing is applied to principal. I made a XXXX time payment of {$250.00} on XXXX/XXXX/16 to cover part of the interest that had accrued. The whole {$250.00} went to interest as I planned. I am setup on auto debit and knew another payment of {$160.00} was going to come out on XXXX/XXXX/16 and at that point it would cover the rest of the accrued interest as of XXXX/XXXX/16 plus approx. {$18.00} would go to principal because all of the accrued interest would be paid. I logged into my account on XXXX/XXXX/16 and noticed that Nelnet was not drafting my XXXX/XXXX/16 payment at all and that only {$75.00} was scheduled to come out for the XXXX/XXXX/16 payment. I called and talked to a rep to ask why my auto debit was n't processed and was told it was because I already made a {$250.00} payment. The rep told me that my repayment plan was for people who could n't make a full regular payment and that anytime I pay extra it will stop the auto debit from drafting. I explained to her that I ca n't make the full regular payment ; however, I can sometimes pay extra depending on my income. I was then told again my plan is for people who ca n't make the full regular payment. My take away from the conversation with the rep is that if I wanted to remain on auto debit - I would never be able to make a payment that is applied towards principal. If I paid ahead, they would n't draft my payment. This is concerning and I feel in bad spirit on the part of Nelnet in helping people to accomplish paying off their loans. I would also like to note that once I stop auto debit I no longer qualify for the 0.25 % interest rate deduction. This also seems in bad spirit on the part of Nelnet. If I want to pay extra, I have to lose the interest rate deduction, and stop auto debit. My payments would continue to be applied towards interest until there is no interest to pay and my auto debits would never draft because I had paid all of the interest. I do n't understand how that is even moral, let alone legal. The Nelnet FAQ section says " Per regulations, all payments are applied to fees first, then interest, and finally principal unless your current repayment plan is Income-Based Repayment. In this situation, your payments would first be applied to interest, then to fees, and finally to principal '' - this is deceptive and not truly how they handle these payments. Instead of applying my payment first to interest, then to fees, and finally to principal they decided to just not take a payment at all. The Nelnet FAQ section also says " Customers whose student loans are on an Income-Based, Income-Contingent, Income-Sensitive, or Pay As You Earn Repayment Plan, or a low-pay forbearance may enroll in auto debit, but are not eligible to have an additional amount automatically debited. If you enroll in auto debit and your loans are on one of these repayment plans, you may make an extra payment anytime by logging in at Nelnet.com and clicking Pay Now on the left. '' - I followed the above procedure to make a payment amount above the normal monthly amount due and then found out my next auto draft, and XXXX the auto draft after that, would not be taken. Where is the explanation in here that if you " pay above the normal amount we 'll stop taking your payments ''? 

Nelnet makes it harder than necessary to make payments above the interest-only payment which is disheartening and unfair to borrowers. I do not argue that the payment allocation method should be interest, fees, and then principal ; however, Nelnet makes it impossible to be on auto debit and makes payments to principal while on an income driven repayment plan.