I honestly still have no idea how FedLoan Servicing calculates how payments are distributed between loans, but I’m definitely trying to figure it out! My frustration with FedLoan Servicing grows as I’m still unable to find the information I’m looking for or at least some explanation of why my $600 payment (which was $257 over the minimum payment) was not able to cover all the interest. Well technically it was, but FedLoan Servicing had other ideas with it.
I received an e-mail response from FedLoan Servicing through their secure ‘contact us’ system and I will say that the responses were pretty much received within 2 business days. They used the full amount of time but they did respond to me. I received mostly generic responses ranging from just saying how the payment system worked, how interest is calculated, etc etc.
I did receive two responses that did attempt to answer my question but still pretty much ignored the major point of the issue. Their website states that “Any interest or fees that have accrued on your loans will be paid first before reducing your principal balance” like I had said before but they seem to ignore this issue in each response, and they are definitely ignoring the fact that I paid $0 into principal on two of my loans.
On my most recent response I’m not really sure what to make of it. They gave me a nice, simple formula that is used to calculate how much each loan payment is:
M=P/[[(1/(1+O/P)) X (1-(1/(1+I/12)T))]/[(1-(1/(1+I/12)))]]
Where M= Monthly Installment, P= Principal Balance, I= Interest Balance, O= Outstanding Interest, T= Total Number of Installments (120 for a 10 year repayment plan)
So if M is the monthly installment, that’s just how much I have to pay each month? That’s not really helpful to me – I paid way over the monthly installment for each loan. I’m trying to figure out how they divided each payment and how they decided to give smaller loans more money and larger loans less money. The monthly installment for those loans is in fact smaller, so I’m not sure why the extra money wouldn’t be weighted in the same way?
They also tried telling me that any extra money I put towards my loans in July would contribute to a payment in August. So basically any extra money is only pre-paying the next month – which is annoying. I wanted to pay extra in that month, not just pay in advance. Nowhere on their website does it state that when making a payment. I’ve sent another response to their support, but it really looks like I’m going to need to get on the phone with them and see if I can get anything sorted out. This is getting a bit ridiculous I think!