Consumer complaint received 2020-04-09 00:00:00
Product: Debt collection — Federal student loan debt
Issue: Attempts to collect debt not owed — Debt was paid
Company: Nelnet, Inc.
State: CO

Complaint narrative:
I, like many American millennials, am in the process of paying off a hefty amount of student loan debt. I took out federal student loans to attend XXXX and then law school back XXXX. I have been paying regularly, have never missed a payment, and currently my student loan debt is down to about $ XXXX ( started around $ XXXX ). As I mentioned, all my loans are direct loans from the federal government and are currently being serviced by a company called Nelnet. 

When I heard that the CARES Act was going to drop interest on federal student loans to 0 %, I was excited because this meant I could continue to pay my regular loan payments, but instead of the ungodly amount that goes to interest, all of my payment would now be applied to the principal balance. In theory, this would help me pay off my loans faster. Back in XXXX after the CARES Act was signed, I called Nelnet to inquire about the XX/XX/XXXX payment I had just made because the CARES Act had taken effect XX/XX/XXXX. I told them that {$150.00} of my XX/XX/XXXX payment had gone to interest and asked if this amount was going to be reapplied to principal. The employee told me yes she believed it would but it would take a few weeks for them to update their systems. I understood and thought they probably service thousands of loans and this type of change was unprecedented so I would be patient with them. 

Ive been checking my online account every few days since and nothing has changed. That payment hasnt been reapplied to principal and my loans continue to show more interest accrual daily. So today, I called again XX/XX/XXXX. This time I got a very honest employee on the line who seemed embarrassed more than anything to explain to me how things were going to work during this time. 

First, she told me my XX/XX/XXXX payment would NOT be reapplied to principal, even though I paid interest at the time when I was not supposed to because of the CARES Act. I was confused and inquired further. She expressed frustration with the companys method and kept saying, I dont know why they are doing it this way, and its hard for me to explain, etc. I told her I wanted to continue making my regular loan payments to principal during this 6 month forbearance and asked how that would work because my accounts were still showing daily interest accrual. She told me yes, I could make payments during the forbearance, but they would have to be manual ( prior to this, I was on auto debit ) and that any payment I made would continue partially going to interest. I asked her what interest?, since the CARES Act halted interest accrual through XX/XX/XXXX. She said her company decided that it would be too much coding work to change the formula on how payments are applied, but here is the kicker : IF borrowers wanted to get the amount they pay to interest over these next 6 months back, they would need to call Nelnet at the end of XXXX when the CARES Acts protection ends and Nelnet would refund the amount that was applied to interest ONLY UPON REQUEST. 

What??? 3 things wrong with this : 1. ) Upon request? So even though my loans are supposed to be accruing 0 % interest for the next 6 months, Nelnet wont change it in their system to correctly reflect that rate - which means any payments I make still go to interest that isnt supposed to exist and IF I want my money back I have to call back in a few months and request it, and if I dont they will just keep the money? I asked if the money would be reapplied to the principal and she said NO. So they will keep your money but WONT apply it to your loan and wont refund it to you unless, and ONLY, if you call and ask? So where will the money be going - into this companys pocket. 

2. ) This essentially stops someone like me who wants to take these next 6 months to aggressively pay more towards principal the inability to do so because they wont redirect that money towards principal only. 

3. ) Nowhere on their website, even on their CARES Act page, is this policy explained. I think if it was the entire consumer protection agency would be on them. I sent an email over a week ago that was never returned. It seems like they dont want to put this in writing. All they say on their website is that you may continue to pay on your loans during the forbearance if you choose to do so. Nowhere is it explained how the money will be applied, or that they will indefinitely hold your portion of the payment that goes towards interest during this time. How can I even be sure that when I call in XXXX they will hold their word and refund that money to me? 

I am appalled. Am I crazy or this some borderline fraudulent and predatory stuff? 

Any help would be greatly appreciated. If you want to contact me further, I am available through email here at XXXX or by phone at XXXX. 

Looking forward to hearing back from you. 

XXXX XXXX

Company response to consumer: Closed with explanation