The Verdict on Online Principal Payments to Sallie Mae
I received an email this afternoon from Sallie Mae in response to my inquiry about how to make online payments to principal. It said:
If you are submitting a payment via Online Billing that is equal to two or more monthly payments, you will be directed to a page where you can choose whether the payment is to be used to prepay the principal or to pay your account ahead.
So I guess that is the answer - I need to make a payment that is equal to two or more monthly payments at a time. My spouse’s minimum monthly payment is about $238, so I need to make extra payments equal to at least $476 to trigger the screen that allows me to designate it as extra principal payments.
As long as the email is accurate, that is. 
So my goal now is to generate at least $500 a month in snowflaking money so that I can make an additional payment every month and designate it to principal. I will still be putting the money into my designated ING subaccount, and then withdrawing it in $500 chunks to make principal payments.
Well, as long as the first time I try it, things work as planned, of course.
Our federal and state tax refunds just hit our checking account today, so I’ll be sorting that out tomorrow when they move from “pending” status, putting enough in our emergency fund to bring it back to $1000, and using part of the rest to begin funding the student loan paydown ING subaccount. On to phase two of SMARP - successfully paying down the principal balance! :cheer:
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February 21st, 2008 at 3:45 pm
i contacted my slma marketing rep about paying more than the minimum required payment, and after he checked with their “experts,” i was told that ANY amount above the minimum would be put towards principal, no matter what method of payment you use. if the payment is double the minimum or more, then you also have the option of advancing your due date.
of course, what a company says and what they actually do can be entirely different…
February 21st, 2008 at 6:00 pm
Interesting. Well I have a lot of confidence in your ability to come up with $500 monthly for the repayment.
Let us know how those payments work out and how they apply.
February 21st, 2008 at 8:26 pm
You always cause me to think. I want to get the huge educational loan I have paid off and I will investigate how to have a second monthly payment put towards principal. I learn so much from your column.
February 22nd, 2008 at 6:53 am
Do you have automatic debit? I’m 99% sure that with autodebit your regular payments gets taken out of your checking account, and anything else you pay goes to principal. That’s how it’s worked for me.
February 22nd, 2008 at 9:15 am
I paid that witch off in three lump sums, so I never thought about her (horrible) interface.
My consolidated federal loans with Citibank I struggled with for longer. I snowflaked as little at $1.50 onto that. It ALWAYS had an option for principal.
February 22nd, 2008 at 9:39 am
I paid off all of my SLs last year. You don’t need a special account to save up a certain amount before you send a principal payment. ANY amount you pay over the minimum due will be applied to principal. The important thing is to select the “apply to principal” option. Otherwise, it will automatically treat your payment like an advanced payment by default, so the can charge the same amount of interest. The more principal payments you send (by the way, you can send them as often as you like), it reduces the interest that accrues every month. Using their online interface for principal payments will not cost you a dime. So don’t wait, pay extra as soon and as often as you can.
You will also notice your next due date will bounce forward as if you made an advance payment, but as long as you selected “principal”, it will be applied as such.
You can do the same if you mail a payment. Write PRINCIPAL ONLY in the memo line of your check or attach a letter that says extra payments to PRINCIPAL ONLY.
February 22nd, 2008 at 10:16 am
@Single Ma - the web interface has never given me an option to select “apply to principal”. Which is what my concern is. According to this email, that option becomes available when you do an online payment of 2x or more of your monthly payment.
Is that true? No idea. That’s what they say now. So I am going to try it. Because the point of me paying early is to avoid interest. Maybe once you are sufficiently “ahead” in payments etc it becomes default to ask you to select apply to principal. In the past when I have overpaid it just tells me I have chosen to overpay and asks me to confirm that fact and doesn’t ask me what I want to do with it.
@KD - I don’t autodebit. If I did it might be simpler.
February 22nd, 2008 at 10:27 am
I noticed something in yone of your posts on Sallie Mae - that they refused to send you a paper notice after they got your email address…I asked my wife about (she’s been in student financial aid for about 20 years) and she said that they cannot refuse to send you a paper notice if you request it. So, if you really want the paper notice, I would bring it up again with customer service. And if they still refuse, contact the Department of Education for advice.
February 22nd, 2008 at 10:59 am
@Flaime - This was several years ago (about 5-6 years ago if I recall correctly), and now I am fine with paying online. At the time, I didn’t do it much and it was new to me and I didn’t want to. When I ran out of my first years worth of coupons, they never sent me more, and when I called and asked, they said I had to pay online. I asked for coupons instead but they claimed they were being “phased out” and I had to use the online system.
Probably they weren’t allowed to do so but I didn’t know that then and I eventually just agreed and started paying online. I don’t want to go back to using coupons now, I just wasn’t pleased about how it was handled then.
February 22nd, 2008 at 9:19 pm
Great to know - I too will have to get rid of SM eventually. Way to go SMARP!!
Also, the way I read this is that any single payment has to be 2x the minimum - i.e. if you made one payment of $476 when the minimum is due, half would count as the minimum payment and the other half would be applied directly to principle. Unless it specified earlier in the email that the principle payment had to be an entirely different payment from the minimum payment.
February 23rd, 2008 at 12:22 am
@JvW - my spouse reads it that way too. I’m not sure. There wasn’t anything else in the email other than the “thank you for contacting Sallie Mae blah blah” stuff. lol
I will be trying something out next week so we’ll see what happens
March 4th, 2008 at 1:36 pm
I am not sure if you have resolved this or not (I was browsing through your blog). The reason that screen would come up only if you pay 2x a monthly payment is in that case you would have the option to “pay ahead”. Otherwise, any extra is automatically applied to the principle. You only generate so much interest each month, and the rest goes to principle. My SL provider is very clear about where the $ went. If you aren’t convinced perhaps you should call them for clarificaiton
Good luck!
March 12th, 2008 at 11:15 am
Thanks for investigating this for everyone. I’ve started making extra payments to my student loans as well and I can’t wait until this summer when I can start killing them off.