Consumer complaint received 2024-02-12 00:00:00
Product: Student loan — Federal student loan servicing
Issue: Dealing with your lender or servicer — Trouble with how payments are being handled
Company: MOHELA
State: AZ

Complaint narrative:
I have had three issues with Mohela in which they are circumventing their own policy in order to charge me more interest on my loans that I would be paying if they were correctly following their policy and applying my payments in the way they are supposed to be applied. 

First, please note that as of XX/XX/XXXX and over the course of time that Mohela has been my loan servicer, they have listed on their website the following : " Payments made over the required amount will be applied to the highest interest rate loan first. '' ( please see the attached and at XXXX XXXX XXXX ) Loan # 1 has an interest rate of 5.83 %.

Loan # 2 has an interest rate of 4.05 %.

Loan # 3 has an interest rate of 5.03 %. 

Issue 1 ) On XX/XX/XXXX, I made a payment of {$1000.00} towards my student loans. Mohela incorrectly applied the payment as follows : {$270.00} towards loan # 1, {$340.00} towards loan # 2, and {$370.00} towards loan # 3. The minimum payment for loan # 2 was {$180.00} and the minimum payment for loan # 3 was {$200.00}. Please see the attached with my current payment history. 

Mohela incorrectly shorted loan # 1 by {$320.00} resulting in more interest being charged against me since that loan has a higher interest rate. 

I contacted Mohela on XX/XX/XXXX with the following message : " I read through your website and you indicate that payments made over the required amount will be applied to the loan with the highest interest rate. This month, I made a payment on XXXX and I paid extra towards the loan. You did not apply the extra amount towards the loan with the highest interest rate, you applied it proportionally against all 3 of my loans. Please correct this error and apply my extra payment amount towards the loan with the highest interest rate. '' Mohela responded on XX/XX/XXXX with the following : " Thank you for contacting MOHELA, Once your accrued interest has been satisfied with your payment, any additional amount that is above your regular monthly payment amount will be applied to the principal balance of your loans and future payments. If you have satisfied your future payment, your next billing statement will indicate a payment is not required for that bill. You may still continue to make payments which will pay your account ahead. Since the extra payment goes towards principal balance, you end up paying less interest over the life of the loan and pay your loans off quicker. 

If you have any additional questions, please contact us toll free at XXXX. Our hours are Monday XXXX XXXX to XXXX XXXX., Tuesday and Wednesday XXXX XXXX. to XXXX XXXX., Thursday and Friday XXXX XXXX. to XXXX XXXX. CT. 

Thank you, MOHELA '' Their response seems to indicate to me that they did not accurately read my initial message because they completely missed the purpose of my message and did not address the concern I raised with them. 

Issue 2 ) I had auto pay set up with Mohela and had several months of no issues with payments being withdrawn. For some reason, Mohela did not process my auto withdrawal for my XX/XX/XXXX payment. This resulted in me not making a payment until XX/XX/XXXX when I was notified that they did not withdraw my payment. They let me know that my payment was late. I had sufficient funds to pay make my payment and the failure to withdraw the funds was on Mohela 's end. 

I called Mohela on XX/XX/XXXX to find out what happened and they could not tell me why they did not withdraw my payment but that it would be working effective XX/XX/XXXX. They refused to credit my account for the 3 days of interest that accrued during the time that they did not take my payment. 

I also addressed the issue with the {$1000.00} payment from issue 1 and they could not tell me why there was a discrepancy between their policy and their actions. They informed me that when payments are made in excess of the minimum amount, they distribute it proportionally amongst the loans. This call was recorded by Mohela and directly contradicts their policy listed on their website. 

They indicated that they could not recalculate the interest from my first {$1000.00} payment and that I would have to make additional payments in the future to target that loan if I wanted payments applied to that loan. 

Issue 3 ) I have recently been trying to pay off loan # 1 since it has the highest interest rate. I have been making payments to target the loan. 

My most recent payment was on XX/XX/XXXX in the amount of {$550.00}. The minimum payments for the loans remain the same and {$550.00} is the minimum amount I owe every month. Mohela once again applied the payment incorrectly towards this loan in a very noticeable an egregious way. Despite the minimum payment on loan # 1 being {$150.00}, Mohela only applied {$31.00} of the {$550.00} payment towards loan # 1.

I have not contacted Mohela regarding issue 3 because they have demonstrated to me in issues 1 and 2 that they will not do anything to remedy this mistake which violates their policy. 

To me their actions indicate that they will brake their policy and incorrectly apply payments to loans with lower interest rates in order to generate more money on interest than if they followed their policy and applied payments towards the loans with the highest interest rate first. At this point, Mohela 's actions are causing me to pay more on my student loan payments than I should have to pay.

Company public response: Company believes it acted appropriately as authorized by contract or law
Company response to consumer: Closed with explanation