Business manager advises on student loans

By and

Anybody out there staring down the barrel of student-loan repayments?

If so, read on.

You might not realize it, but there is a learning curve to paying those things off. Maybe you can learn from my mistakes.

As a student, I borrowed Stafford and private loans. I secured the loans through three different banks.

Within a year or two of graduating, Sallie Mae, the nation’s largest student-loan service provider, had purchased my loans from the other three banks.

Don’t let this freak you out-banks view loans as products, which they can buy and sell.

Chances are, Sallie Mae will get its hands on your loans, since it specializes in student loans. If so, it will send you a letter saying it has bought your loans from XYZ Bank and from now on you’ll need to send payments to Sallie Mae.

Seems pretty straight forward, right?

Well, yeah, except if you have a combination of federal and private loans.

Sallie Mae has a division that deals with federal loans, and another that deals with private loans. There isn’t much communication between the two. If you are talking to the federal side and have a question about your private loan, they have to transfer you.

And yet from an accounts receivable side, it can’t seem to separate the two. You can try remitting payment to two separate P.O. boxes, but the accounts receivable folks will always apply both payments to your private loan (or, I suspect, whichever loan has the lower interest rate).

I had no idea that was happening to me until I got a nasty letter a few years ago saying I was 90 days past-due on my Stafford loans and my credit was about to be dinged. I called the 800 number and went round and round the automated system. I don’t know how I finally managed to talk to a live person, but when I expressed my frustration, she said I should just pretend I don’t have a touch-tone phone and stay on the line.

Excellent advice, considering I would have to use that tactic every month the next few years to tell them to re-apply my Stafford payments to the correct account. The automated system (in English and Spanish) sounds quite menacing, but don’t give in. Wait for a while and I promise you’ll reach a customer service rep.

I started by calling each month, asking the service rep where my payment had been applied and asking for a correction. Then I always asked if I could do something different to get the payment applied correctly the first time.

They said they could set me up on a plan to have the payments come directly from my bank account.

No good.

I’m trying to pay my loans off quicker, so I pay different amounts each month.

They said they’d change my monthly due dates so my payments would be staggered by two weeks.

Didn’t work.

They said to send payment coupons with my check.

I was.

They said to write a note on the top of my payment coupon (despite the coupon saying to not attach correspondence). Didn’t work.

I learned to check my account status online each month to see where they applied my payments. Once, when I was out of the country, I had to send an e-mail to the Sallie Mae folks asking them to reapply my payment since I couldn’t reach them by phone.

That worked, so I’ve done that a few times. But it still was frustrating.

You should be aware of something else.

If Sallie Mae services your account, it will tempt you to give your e-mail address for a chance at having up to $25,000 of your loans paid for you. Feel free to do that, but realize that once those guys get your e-mail address they won’t send you paper invoices anymore.

At least they didn’t for me.

They started sending it electronically, which was fine until I moved and changed jobs shortly thereafter.

I gave them my new street address, but it didn’t do any good because they were sending invoices to a defunct e-mail address. That was right about the time of the annual change in interest rates, and they had just bought my final loans, so I kept thinking maybe they were a little behind in getting things sent out.

I soon learned that Sallie Mae expects payments no matter what changes are being made, regardless of whether you receive any communication from them.

And another thing.

Make sure you understand what consolidating your loans does.

Private loans can’t be consolidated. Federal loans can, but just once. After that, you’re locked into that rate for life.

Had I waited another six months to consolidate my loans, I would be paying less than 4 percent right now. Instead, I’m paying 5.75 percent for the next 16 years.

About six months ago, I finally gave in to Sallie Mae’s wishes.

Each month, my checking account gets debited the minimum payment for each loan. The only correspondence (electronic or otherwise) I get from them now is my annual 1098 form showing how much interest I’ve paid.

I’m not paying the loans down very fast, but at least I have peace of mind.

After all these years of fighting with Sallie Mae, I’ll take the peace of mind.

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