Sallie Mae Can’t Count

Day 227: Sallie Mae Strikes Again!

I’ve shared before my opinion on handling frustrating customer service situations – rather than try to reason with a script reading, non-thinker in a cube half way across the country (perhaps half way around the world), if I’m materially aggravated, I’ll draft a letter to the CEO. 

Admittedly my results have been mixed.  The CEO from Six Flags was wildly dismissive, and the CEO from U-Haul delegated his duties to a lackey unable to understand my complaint, but the COO for TransUnion called me directly and invested 45 minutes in discussing the issue and providing me with his personal contact information if I ever experienced another problem with his organization.

So while my outcomes have varied, I’m satisfied in knowing I’ve done everything I can do.  I’ve escalated to the top.  Because I know most organizations have a dedicated team responsible for handling these types of letters, I’m confident I’ll either reach a pleasant conclusion or I’ll identify a company not worthy of my business.  Sorry, Six Flags and U-Haul, my dollars are not for you.

Recently I’ve encountered an interesting cross road between my penchant for letter writing and my motivation for driving this site.  While making extra principal payments against my wife’s student loan (in an effort to get out of debt), I’ve observed a dishonest tactic by Sallie Mae.  It seems that despite very clear labeling, Ms. Mae likes to treat large principal payments as advanced monthly payments – interest and all.  In this way, a large payment pushes out the next monthly payment date (forcing you to pre-pay interest) rather than unilaterally attacking the principal loan balance.

I personally find this a dishonest practice at best and malicious theft at worst.  I’ve also found it cause for another round of letters.

As a set up to the letters below, this nonsense happened just recently (March and again in April), but it also happened multiple times in the fall of 2008 – before my job transition.  So below, to demonstrate a full context, I’m providing copies of my letters from just last week, as well as, the letter from 2008.  Finally, to further illustrate my point, I’ve provided the form letter I customize each time I submit an additional payment – you tell me how they missed my intentions.

How a lending institution could screw this up so badly is beyond me.  How they could do so when provided such clear direction to the contrary is another matter altogether.  Face it, my messages to you only resonate louder against the backdrop of these examples – Debt Sucks.  If sweet sounding Sallie Mae is so eager to screw you over, can you imagine what other lenders have in store for you?

Enjoy, and let me know what you think below:


Letter to CEO Albert L. Lord – April 2010

April 12, 2010

Albert L. Lord – 

I am writing to your office a second time to share my continued disappointment with the significant limitations demonstrated by your organization.

On a number of occasions I have submitted additional principal payments against my wife’s outstanding student loan (account number ##########).  When these payments are processed, they are routinely processed incorrectly and recently a large payment was not credited at all.

My previous correspondence dated December 30, 2008 (enclosed) dealt with the repeated failure of your organization to recognize clearly marked checks as payments against the principal balance.  Instead of reviewing the account records – which so clearly demonstrated a “next payment due” date several years into the future – my wife was met with a terse phone call explaining “her error” and a promise to contact me directly to “help set me straight”.  Not surprisingly I was never contacted and the account information on the web was quickly corrected.  Apologies and/or acknowledgements remain outstanding.

True to form, your organization has screwed up again.

  • On March 14 a check for $1000 was mailed and cashed on March 22.  This check and accompanying letter (both enclosed) were clearly marked as principal payments yet processed as monthly pre-payments (screen shot enclosed demonstrates “next due date” of January 2011)
  • On March 18 a check for $3036 was mailed and cashed on March 25.  This check and accompanying letter (both enclosed) was not credited against my wife’s account until at least April 9 and not until the payment had been verified multiple times by my wife.  This payment too has been processed as monthly-pre-payments (screen shot enclosed demonstrates a ridiculous ‘next due date” of February 2013)
  • During my wife’s follow-ups she was told many conflicting stories.  She was told that the payments were treated as principal payments with no explanation for what your website demonstrated.  She was also told that she was responsible for all interest on the loan regardless of how quickly the loan was paid.  Clearly demonstrating errors in both your recruiting and training processes.

I am mailing a check to your organization this week to pay our remaining balance and forever close my wife’s account.  I require that you promptly and accurately process this payment – steps which have represented significant challenges to your operations team to date. 

As an accurate payoff balance is impossible to glean from your site, given its design to assume interest pre-payments, I also require a prompt return of any overpayments which may be unwittingly included.

I expect all overpayments and documents confirming the closure of this account to be express mailed within 72 hours of the time my check is presented for payment.

In the interest of full disclosure and to help inspire accountability on your side, I will be posting this letter and your response (including its timeliness) on my blog.

Attached you will find the enclosures referenced above.  Please contact me or the loan holder if there are questions, meanwhile, I await your prompt response.


Letter to Payment Center and CEO Albert L. Lord – December 2008

December 30, 2008

Sallie Mae Payment Center – 


Please consider this letter a wake-up call to help you overcome a troubling level of incompetence.

Allow me to explain.  On two occasions in November 2008 I provided checks with accompanying letters indicating that my payments be treated as additional principal payments – I am resubmitting those letters for your re-review. 

However, when viewing the account on-line my payments have been treated as pre-payments – which includes the pre-payment of interest.  A losing practice if ever there was one.

To address this issue, I require the following 4 actions on your part:

  1. Immediately adjust the accounting for my additional payments according to both my current and previous requests
  2. Make the necessary interest credits to the account
  3. Provide me with a detailed accounting of the above steps
  4. Provide me with your preferred method of communicating an intent to make additional principal payment as black and white printed letters are not sufficient

 Enclosed please find copies of my original letters from November.  Please contact me or the loan holder if there are questions, meanwhile, I will await your prompt response.


 Additional Principal Payment Template

March 14, 2010

Sallie Mae -

Please credit the full amount of the enclosed check as an additional principal payment against my wife’s student loan.

  • Loan Number:   ##########
  • Loan Holder:      wife’s maiden name/wife’s married name
  •  Current Payment Amount:         $1,000.00

Upon posting this payment, please provide loan holder with an updated payoff balance.

Please contact me or the loan holder if there are questions.


So what do you think?  Is Sallie Mae sinister or just inept?  Am I overacting?  How do you think they’ll respond?? 

I’d love to hear your response and I promise to share Sallie’s response with you.

 Photo By: jk5854

Your Turn – If you enjoyed this article, I would personally appreciate it if you would consider commenting below and/or subscribing to our Free Updates via email or RSS updates.  Thanks!

Category: Personal Finance

30 thoughts on “Sallie Mae Can’t Count

  1. Lara on said:

    Dave, I sympathize with this situation, and have gone through it myself. My problem was trying to pay down the principle on a car loan, and having it applied as future payments.

    Letters to CEO’s, presidents, etc might occasionally be effective, but usually they don’t even make it to the addressee’s desk. Years ago I was the ‘lackey’ that these type letters, sent to the CEO of our company, were given to. One stands out in my mind – this poor guy, obviously retired and with too much time on his hands, would write about once a week wanting a detailed bank statement of his escrow account which was transferred to us when we purchased his loan (in a package with thousands of other loans). I answered his first few letters, explaining to him that his escrowed funds were not in a separate bank account, that they were in a general escrow account for all mortgagees. He didn’t understand this and continued to write, escalating the aggression and threats as time went on. I finally quit answering his letters. His account was in good standing with no problems, the guy was just being paranoid.

    But I digress. :-) The point is, many, MANY of these type letters are sent to the head haunchos, and many are unfounded. Of course yours is not one of those. But the bottom line is that the haunchos would never have time to read, much less respond to, all these letters. At many companies they get no special treatment and are routinely handed to the ‘lackeys’ to handle. Very frustrating when you have a legitimate complaint.

    • Dave Ozment on said:

      Thanks Lara… and you are right. The vast majority of these are routed to a team and I understand that. I don’t want my CEO reading mail from kooks all day. That said, I do think it is more effective than writting or calling the customer service center. Those are simply black holes. As a consultant I’ve worked with many companies who have a team just like the ones you worked on… and, as you demonstrated, you did try to service the issue. That is what I’m hoping for.


  2. judy on said:

    thank you for writing this. I have been interested in making additional payments against my sons student loan (a PLUS loan, so i am liable) and I read where additional payments could not be made just against the principle. So it seems that the only way to pay it off early is to save all of the money in a separate account until you get the full amount due and then pay it off. this is going to be extremely difficult, and i’m sure thats the way they like it. I feel hoodwinked. this should be the next target of the obama administration or even the tea partiers – I don’t care as long as the rip-off gets obliterated…

    • Dave Ozment on said:

      Thanks Judy. Some loans do have pre-payment penalities so those are always good terms to review. It sounds like your loan has a similar clause elimately designed to cut down on the required loan servicing staff.

      I think you should open a separate savings account into which you plow the extra principle payments. Automate the transfer and then forget about the account. In your mind treat it just as if you send the money to the lender. After a while, you’ll have the money required to pay it off.

      Hope that helps and good luck…. are re-read those terms too…. the payoff restriction could be only for the first few years and not the entire life of the loan.


    • LJ Wan767 on said:

      I had to do just that. After dealing with Sallie Mae’s total incompetence for years I finally saved up 50,000$ and paid them off all at once. I had tried several large payments and they totally screwed it up. And to the idea that they have some high tech system and some intelligent plan:un-uh! No way. They made gross math errors. I tracked all of their errors over several years and they cost me so much. Thousands! My original loan amount was $34,000. If I had paid them on their schedule I would have paid almost $250,000. No kidding. Do the math. They are total shitbag theives. Don’t let your college bound students get associated with them. Fair warning!

  3. Mako on said:

    They are just incompetent.

    I am paying off 3 separate lenders for my student loans. I pay off all of them online. The private lenders have the option to “apply extra to principle” . Im not sure if the fed govt does that too, or just assumes.

    I also have a car loan, which I pay with automatic payments. Unfortunately I tried to pay extra and it just advanced the date of payment. So now i’ve screwed myself over, cuz the payment date is 2 months ahead, but I dont want interest to keep piling up. But they also screwed themselves over by reducing the interest by .25 for automatic payments.

    You would think lenders would put a little bit more thought and effort into receiving your money.
    .-= Mako´s last blog ..Financial Intelligence: Selling your junk online =-.

    • Dave Ozment on said:

      Well, the scary part Mako, is that they DO out considerable thought into the process. Lenders have metrics on the number of loans that will have irregular payment patterns and the costs associated with maintaining a mail rool dedicated to processing checks. By offering a smaller rate to incent you to set up an autopay, they can calculate the amount they are actually saving over the average loan. It is a highly refined model… don’t think you’re getting too much of a deal.

      Also, the tactic of advancing the due date is a method that requires less hands to hold the payments AND it forces you to pre-pay interest. Heck, if you wanted to pay the interest then there is no reason to pre-pay the loan. But so many people will not recognize this and may eventually prepay the entire loan balance interest and all.

      The systems are designed to milk the lowest common demonimator… King Solomon was right, a fool and his money are easily parted.


  4. Dave, your letters are great! I also go to the top if I find something materially wrong with a service provided (or something that went very well).

    My most recent “customer service” letters received very positive responses. One was to an exec at Marriott for some issues I had at a new Residence Inn (including at 4am firedrill). At the time I was a heavy traveler and I ended up getting an apology and was reimbursed for my entire week’s stay. I also sent a letter to a GM at a car dealership after my last car purchase with much love for my salesman (and much distaste for the F&I guy). While I didn’t get any discounts, I was assured that my letter was going to be read to the whole dealership at the next weekly meeting and that the problem with the F&I department would never be repeated.

    As a small business owner myself, if I ever receive any type of serious complaint I go out of my way to rectify the situation and really do appreciate the feedback. I know many other business leaders feel the same way…you can’t fix it if you don’t know it’s broke.
    .-= Car Negotiation Coach´s last blog ..How to organize financial documents for your car =-.

    • Dave Ozment on said:

      Ah, the 4am fire alarm….. I’m glad I don’t travel every week like I used to.

  5. You are NOT overreacting. I had the very SAME problem with Volkswagen with my car. And they did it to me for a while before I caught it. In fact my “prepayments” at one point ended up being MORE than what I owed on the car and they had to send me a check back. But they STILL charged me interest when they had even more money than what I owed. My letter writing results haven’t been the best, and nowhere in their contract does it state that this is how they would apply payments so I’m taking mine to the next level – the AG’s office here in NY because they scam enough people.
    .-= Cheapskate sandy´s last blog ..Money Hackers Carnival #116: Back to Basics Edition =-.

    • Dave Ozment on said:

      Debt sucks and they’ll try all kinds of tactics to keep us in debt… you have to pay attention to your bills and debts and work hard to get rid of them. I hope your journey is progressing well.


    • Bill on said:

      God’s word warns us that “The borrower is slave to the lender.”

  6. Tim on said:


    Direct non Indian line to the fuckers at sallie mae. Call and harass, call and bitch, call every 5 minutes if you can and waste their time which means waste their money.

    Don’t give out your soc # or name, as they will ask. Just call and calm as possible, let them know what fuckers they are or work for. When they hang up, call again and do the same thing. It won’t knock out your debt, but it feels fucking good.

  7. chris on said:

    Dave, I’m just starting to pay extra on my Sallie Mae loans. I tried it about a year ago by just paying extra through their online payment site…of course, that didn’t work – it went through as a prepay.
    When SM didn’t royally screw up your payments…how did you do it? By mailing in several checks?
    Is there any way to automate this process? By setting up auto billpay with my bank?
    It seems, from reading several comment threads on this subject, that timing is crucial for SM to count he overpayments towards the principal (because the interest occurs daily or something like that).

  8. Crystal on said:

    Can someone explain how this is all working…I have been paying extra money on my car loan each month. My next statement does say I owe $0 for that months payment. I still send a payment anyway. Am I being charged extra interest? If they just applied it to the principle than would my statement say I owed the $400 care payment for that month instead of $0.

  9. Hi, Dave, its been more than a year, did you ever receive a response back, and if so, what did it say, I’m curious? I like how you brought King Solomon into the mix with his quote. Speaking of which, I wonder what King Solomon’s letter to Sallie Mae would have looked like?

  10. angi on said:

    Sallie Mae has been doing the EXACT same thing to me since June every time I make an extra payment. I follow the instructions on their site online- click on pre-pay button and send an email specifiying the principal payment- each and every time I make an extra payment. Exactly as written and exactly as supervisors of Sallie Mae have instructed me. They KEEP advancing my due date.

    This is a game, not incompetency.There are thousands of customers having the same experience when they try to pay off the loan early. There should be a class action lawsuit. Who can we contact? Better Business Bureau? Consuemr Affairs? 20-20?

    My experience:
    The supervisor tried to tell me that the advanced due date was mandatory policy. I told her that she had just contradicted the stated information and procedure posted on the Sallie Mae website on how to pay down principal. Then she tried to change the story and had the nerve to tell me that I had chosen/clicked on advance due date online when I sent a $2000 extra payment. I told her that I wanted the fax number because I would send her the screen shot of my computer.

    Now I will have to call each time I make a payment and make them stay with me on the phone while I use their online site.

  11. Tammie on said:

    I received a $10,000 Ameri Corps grant toward my student loans. When I sent in the payment voucher Sallie Mae applied it towards future payments (including interest) and not the principal balance like they were supposed to. Furthermore, they always apply my extra payments to future payments as well. I just started putting “apply to principal” in the memo line, we’ll see if that works. You have to pay close attention to how they apply the money, I had no idea until I was doing my taxes and started investigating why the interest I paid for the year was so high. Why bother paying off the loan early if its not going to save me anything.

    • Dave Ozment on said:

      They are cheats that prey on those not paying attention. Check the article and the comments… simply writing “apply to principle” may not work. Stay on it.

  12. T on said:

    They have been doing this practice for years… I came acrosss this in 2001 and liek you went rounds with personnel. I started wtih a simple statement on the check, that didn’t work. I’d call and they’d tell me to write a letter. I’d include a letter detailing it, that woudln’t work. I’d call again…. After 5 months of going rounds they’d give me some bogus story about sending it to a different address…. I’ve come to the conclusion, IT IS INTENTIONAL. They do not want you paying off early.

    • Dave Ozment on said:

      Agreed, they are taking advantage of those not paying attention… and most folks today do not pay attention.

  13. Jennifer on said:

    I guess I am confused about what is happening with paying extra. My husband has lots of student loan debt that we are paying one loan extra at a time, all the loans are serviced by Sallie Mae. My understanding of how the payments are being applied are any outstanding interest and the rest goes to principal. We currently have a due date on our highest interest rate loan a year and a half out, but we still have auto debit for the amount of payment monthly and then I submit a check weekly from my husband’s weekly paycheck. I have seen my daily interest amount drop from $7.73 to $6.46 and I only got involved a month and a half ago. Did Sallie Mae change policies or am I misunderstanding what the problem is?

    Jennifer´s last blog post ..Make Your Life Easy

    • Dave Ozment on said:

      If you are paying extra payments AND they are showing you’re not due for another payment for another 18 months, then they have simply applied your extra cash to future months payments. This is NOT achieving your goal of paying it off early for less month. You’re making a full month’s payment – interest included – for a month that may be 18 months out. You need to raise holy hay about them applying every extra cent to the principle balance now.

      By virtual of being 18 months ahead of schedule you’re principle will go down, which allows them to make the claim that your daily interest is lower. But you are paying each payment at a principle to interest ratio that is amortized based on the original debt balance. If you continue to pay at that rate, you’ll never pay less than the full load an interest lump sum, even if you pay it off early.

      It sounds like they are ripping you off.

      Think about even the terms they are using. You are 18 months ahead on your monthly payments, RATHER THAN, you are x months closer to settling the account. If you have a 5 year loan, monthly payments you have 60 payments due. If I pay extra each month, I want the 60 to get smaller because that means the interest is not spreading as far into the future. My pegging the 60, the term is not changing. In effect, you’re paying a prepayment penality.

      I had a furniture company do this to me years ago and Sallie Mae as well. They both made claims and argued but when challenged with math, both restated the account. I encourage you to do the same

      Thanks for commenting.

  14. Helen on said:

    My husband and I are co-signers on our children’s Sallie Mae student loans (found you too late, Dave!). Any way we are aggressively sending additional payments to assist with loan repayment. We always send the additional payments by mail with a letter stating explicitly that the money is an additional principal payment on the balance of a specific loan (we include the number)and we also explicitly state that we do not want the loan payment date extended or the monthly payment amount reduced. My experience is that Sallie Mae continues to adjust the amount due amount (reducing the amount) and extends the payment dates to keep the loans on the 15 year repayment schedule regardless of your stated wishes and attempts to pay off the loan sooner.
    As someone stated earlier, you should continue to pay the original payment amount each month even if this means sending in an additional check to make up the difference. Payments are first applied to outstanding fees, then to interest on principal and then to principal. Sallie Mae routinely misappropriates additional payments even with the letter directing the allocation of the payment.

    I keep waiting for the class action lawsuit to address the predatory lending practices of Sallie Mae and what the miscalculations of interest owed.
    Helen´s last blog post ..Make Your Life Easy

    • Dave Ozment on said:

      Eventually enough people will complain and protest and Sallie Mae will take notice, but it’ll take a while. I had a C Level leader from Sammie Mae insist that they did not deploy this tactic but clearly they do. The feedback and response to this article alone is evidence that they are cheating people every day.

      • Helen on said:

        I am wondering these practices should be brought to Congressional attention under banking and finance committee or consumer protection. Any ideas?
        Helen´s last blog post ..Make Your Life Easy

  15. Guillermo on said:

    It’s principal, not the -ple form which refers to a doctrine or a principle. Get it right! I’m sure Alfred Lord chuckled when he read your letter.

    • Dave Ozment on said:

      Good work Guillermo. You win the internet today!

  16. Mark on said:

    I would recommend saying “do not advance due date” in your letter. When you make a large payment, your additional amount WILL apply to principal and not to future interest, so the instructions “apply to principal” are not very helpful in applying the payment to your account.

    BUT an advance due date will in no way cost you extra if you just continue making the same regular payments regardless of what Sallie Mae says is due.

    The only problem occurs if you make a payment that advances your due date for something like a year and then you do nothing for that year just because you don’t receive a statement. But that’s either your fault or your plan (because some people purposefully prepay their loan for convenience sake).

    If you are serious about paying a debt off early, just continue making larger payments and either clearly request not to advance the due date (I have two student loan servicers that have this option on their website, I bet Sallie Mae does as well) or stop depending on your loan servicer to remind you a payment is due and just continue making payments that aren’t “due”

    • Dave Ozment on said:

      My experience with Sallie Mae is that the claim to be applying the extra dollars to the principle… all the way up to the CEO. However, in reality they are not, they are applying the extra to future payments. Either they are REALLY REALLY dumb or they are being sinister. Neither is a public service.

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