Thursday, April 16, 2009

Aunt Sallie, you Hussy!

As promised, a little rant against my dear Aunt Sallie Mae. I don't hate her like some crybabies out there, I really don't. Her loans and loans from similar lenders enabled me to get a great education, which led to a fulfilling career, yadda yadda yadda. But sometimes she just gets on my nerves.

So I owe her a lot of money. I don't really pay attention to how much because I figure it's not at SO bad of an interest rate (4.85%) and the monthly payments aren't SO bad ($406.96).

But yesterday when I went to make my payment I noticed something I had never seen before. My monthly accrued interest was $415 - $9 more than my monthly payment. What the heck! I think the last time I looked at that box it said something to the effect of $353, so at least I was making a small dent in the principal. But to be accruing more than I'm paying? That's just nonsense.

In January I posted that my total outstanding debt to Aunt Sallie was $76,243.81. Guess what my total is today (yesterday's payment has not yet posted)?

$76,363.78

Yes about $120 more than it was 4 months ago, despite my timely payments. Stupid hussy apparently accrues interest daily. Who does that?

Here's what she has to say:

3) Why is a different amount applied to principal/interest every month?

Your education loan is a simple interest loan. Interest accrues daily on the unpaid principal balance. The number of days between payments determines the amount applied to interest from each payment. The formula for calculating simple interest is as follows:

Principal balance x Interest rate x Number of days between payments / 365.25



So I'm gonna have to play around with the interest calculator and maybe up my payment amount because there's just no way I'm gonna accrue more student loan debt. I don't want to be a freshman forever.

13 comments:

asgreen said...

Ug! How frustrating.

Dedicated said...

I completely understand your beef with this. I was just wondering, since it was noticable to you before - did you pay ahead at anytime and then slowly or all at once bring the payment back in line with date first determined? This could explain the amount increase, you would have had a huge decrease to the principal when you paid early.

I think I would scrounge up $119.97 and send Aunt Sally a check to get back to ground zero.

Then take your principal $76363.78 x 4.85%/365 = $10.147 of interest a day. Making my payments reflect covering + extra for principal. So, on 31 day months, I would pay more then on 30 day months.

I agree it is a great rate, so unless I was planning a home purchase, I would let most of the debt ride.

Dedicated said...

Oh, just wanted to say - I love the picture. I'm scared of your Aunt Sallie Too!

Fabulously Broke said...

It does that in Canada too. It's why I snowflaked so much any time I had the extra cash instead of hoarding the cash until the monthly payment and making a bigger payment

Berry Girl said...

It is craaazzy.Even though youve been making payments timely, your principla is higher than 4 months ago? I can not wrap my head around this one.

SonyaAnn said...

It kind of seems like Aunt Sallie is trying to make it so you can't pay it off! Maybe her new name should be uncle knee capper!

Anonymous said...

I would ask Aunt Sally for a amortization schedule that will show how/when the loans will be paid off. This way you will be able to plan it out better.

GREENI$BLACK said...

I totally agree with you, the student loan interest system seems INSANE to me!

One thing that really peeves me, is that everyone under the sun says, "oh, student loan debt is GOOD DEBT," just pay the minimum and you'll be fine.

Um, no thanks! My student loan interest is usually about 30-40 a month, so my parents and I have made a plan to make double payments on the account. That way, the second payment of the month is almost completely applied to prinicple. Doing it this way has put me one year ahead of plan, and I'm going to keep going to get it down to zero as soon as possible.

So, the moral of the story is - all debt is bad, and interest sucks! The worst part is at least credit cards let you have promo APRs and zero percent interest. Not so with student loans. All you can do is "lower your monthly payments" aka, "pay more interest and extend your slavery to us forever!"

Good luck with increasing you payments. Ever since I doubled mine, it has been a great relief to see SOME money going toward the actual debt, not the interest!

-GIB

ldub said...

grr! very frustrating. i think i'd go with everyone else here and look at raising your payments so that you're at least getting a little ahead each month on this loan AND calling to find out if they have a program that gives you any interest rate deductions for timely payment, automatic withdrawal, etc. i know i get something like .25% off for paying via auto withdrawal and another .5% or somesuch for having paid on time for 24 months. since you've been getting your stuff back in order, you might be getting close to a discount for those timely payments. always worth asking for whatever they can give!

damn hussies!

DogAteMyFinances said...

That is so wrong. I'm angry for you. She'll never go away unless you throw everything you have at her.

Simplelivin' said...

Wow! That is ridiculous!!! I guess anything extra you can find should be put towards paying it down. That sucks though. Good luck on getting ahead!

Jim ~ mydebtblog.com said...

Not exactly sure how a loan you're paying on is going up unless you're not paying at least the interest each month. Your payment seems to be on a graduated plan where it starts lower but will increase later. The only simple way to make it go down is you're going to have to pay more. Hopefully with your new job and extra pay, you should be able to do this now.

Anonymous said...

If you can, you might want to try splitting you payment up bi-weekly (like, one-half of the monthly payment after each bi-weekly paycheck). This has the benefit of keeping you from paying interest on the interest, since you said it accrues daily. It won't be much, but every little bit helps, right?