She tried to make extra payments on her student loans, then almost lost thousands of dollars

  • Making extra payments on your student loan balance will release you from your debt sooner, and save you interest.
  • Getting your payments applied to your account can be a high-wire act.
  • Here's how to proceed.
Worried frustrated woman shocked by bad news while reading letter
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After nearly two decades of student loan payments, Lisa Wickman saw the light. Her new fiance offered to help her put an end to the persistent debt. And so the elementary school teacher from Grand Blanc, Michigan, mailed a $7,000 check in February to Navient, one of the country's largest student-loan servicers.

Weeks went by, and the payment still didn’t show up on her account.

“It got very frustrating,” said the 53-year-old Wickman.

Finally, she called. She said a representative told her that she’d mailed the check to the wrong address. “They led me to believe it was a completely different place I’d sent my check to — but it really was Navient," she said.

Indeed, she’d found the address on the servicer’s website and the $7,000 check was cleared, and gone from her bank account. She said the representative at Navient told her she’d be refunded in four to six weeks, but months rolled by and the money still hadn’t returned.

“I was told different things by different people,” Wickman said. Four months after she’d sent the check, she was finally refunded the $7,000, but in the meantime interest had accrued. (She said Navient is now working to discharge those additional fees).

Paul Hartwick, vice president of corporate communications at Wilmington, Delaware-based Navient, said he could not immediately provide details about Wickman's case. However, he said the servicer has recently made updates to its website "to make it even easier for customers to provide instructions related to additional payments."

He added, "We work very hard to make it easy for our customers to repay their loans."

Lisa Wickman wanted to make a dent in her student loans, but then something went wrong.

Making extra payments on your student loans can reduce overall interest and free you from your debt years earlier. Yet the Consumer Financial Protection Bureau reports that borrowers trying to get ahead on their education debt can be sidetracked by their student loan servicer. Payment processing issues accounted for 17 percent of all student loan complaints during the second quarter of 2016, according to the Bureau.

"I was told different things by different people." -Lisa Wickman, a student loan borrower

Student loan experts agree: trying to make extra payments on your education debt can bring on headaches.

"Different loan types could be handled by different offices by the different servicers," said Elaine Griffin Rubin, senior contributor and communications specialist at Edvisors and a former employee of the U.S. Department of Education’s office of Federal Student Aid.

Head-spinning, huh? But don't give up yet.

A CNBC reporter recently wrote about how paying just $25 more a month (on top of your regular payments) on a $30,000 student loan balance with an 8 percent interest rate and a 10-year repayment term can save you more than $1,000 in the end along with an entire year of monthly payments.

You just want to proceed with caution.

"There are important things you should be doing as a borrower to make sure your extra payments are really getting you ahead," said Diane Cheng, associate research director at the nonprofit group The Institute for College Access and Success.

(Although private student loans come with their own rules, those lenders are prohibited from imposing fees and penalties on borrowers for early repayment).

Be clear

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First, if you're paying your student loan by check, make sure you're sending it to the address on your billing statement, said Griffin Rubin. "There's a lot of issues of checks going to the wrong place," she said.

You'll want to specify that you're making an extra payment and not an early payment.

"You absolutely have to send it in with instructions," said Mark Kantrowitz, publisher of SavingforCollege.com and a student loan expert.

Otherwise the servicer will simply not bill you the next month or months, and the purpose of your extra payment — to stave off interest and be done paying sooner — is cancelled out.

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If you're paying by check, write that it's an extra payment to be applied to your balance in the memo line. If you're paying online, there should be a spot for you to write this information in a comments section.

If you're trying to target your extra payment to a particular loan (experts recommend doing so to the one with the highest interest rate), specify that, by providing the loan ID number with the amount you want applied.

Don't assume everything will go well. "Always double check," Griffin Rubin said. "I've seen mistakes happen, the comments didn't save for some reason."

If you don't see your extra payment applied, or applied correctly, it's time to call your servicer.

Time the payment strategically

Gina Pricope | Getty Images

Lots of student borrowers bemoan the fact that their money is put toward interest, and they don't see their balance go down.

There's actually a federal regulation that says student loan payments are applied first to collection charges and late fees (if there are any), then to interest and finally, to your principal. "Principal is actually last on that list," Griffin Rubin said.

That's why Kantrowitz recommends sending in your extra payment a day or two after your regular payment. "That regular payment will have taken care of the interest and so that extra payment will go entirely to principal," Kantrowitz said.

Make sure it's the right move for you

If you're enrolled in the standard 10-year repayment plan, extra payments can only do good.

However, if you're in an income-driven repayment plan in which your monthly payments are just going to interest or if you're pursuing public service loan forgiveness, you might want to stick to your regular payments, Kantrowitz said.

That's because both programs are supposed to result in your debt being erased, and, he said, "Why would you want to reduce the amount of your forgiveness?"