If nothing else, they should never have processed the payment if they had no intention of following the explicit instructions included with it.

I pay double my monthly payment on my student loan and I do not allow any company to automatically reach into my checking account for money ever, .25% interest rate discount or not. All the payments are set up as a push from BillPay.

What would they do with the extra money if you didn't allow the pull and set up your payments as a push?

Well, to be fair, they are taking your money, they just prefer to apply it to your account in a manner that generates the most revenue for them. If you pay down the principal faster, less interest for them.

The only criticism I'd levy, and it's somewhat speculative, is the way you wrote your instructions. If the OP just wrote "apply this to my loan with highest interest rate", I can see them not wanting to have to do the research to figure out which loan that was. If you're going to send in extra payments like this, especially when there are multiple loans, you should make sure you are explicit as to which account number it's to be applied to. Leaving it up to them to do the research and figure it out isn't really appropriate and will never turn out well.

That's bizarre. I have loans through Citibank, which I pay online, and when I do I always check a little box that says "apply extra toward principal". I guess it gets trickier if you're doing autopay, but I tend to think everything is trickier if you're doing autopay.

The OP should have logged into the website and made the payment online.
The following text is copied from their Pay Online page...

Why not just go here and click the box next to Apply Extra Toward Principle?

is it just me or is every business now not in the business of doing their job. This customer asked them to do something and they in turn tell her "no YOU do this this and this". What is going on??? The CUSTOMER should not be responsible for a matter that is obviously back office work!!! I see it everywhere. Customer service is dead and the companies and corporations keep raising prices, cutting jobs and recording huge profits.

So perhaps this is the issue: As @Clobberella and @veronykah posted, there is a way to pay against the pricinpal online, and it sounds like that can be done without signing up for automatic payments.

It's quite possible that the check processing center does not have a capability to apply extra payments against the principal.

And perhaps the CSR on the phone is just following the company line and promoting automatic payments, when in reality that isn't necessary.

@Clobberella: Not really. Having Citibank student loans as well, I set up autopay online and it's not at all trickier (in fact, it's a one-click checkbox).

Methinks this is user, not bank, error.

@rpm773: I have Citibank student loans, and although I haven't paid by check in a very long time, they DID have that capability at one point (there was a little payment coupon you sent back with the payment that had a checkbox for applying the extra to principle).

@Everyone:

None of the above changes the fact that, if they had no intention of following the instructions included with the payment, they should have simply returned the check.

I may have a solution for the OP:

I had a similiar problem with Citibank a while ago - I have multiple student loans which are consolidated into 2 larger loans, and then a lower principal but higher interest rate private loan. The student loans are on deferrment right now, but Im trying to pay down the private loan, which I can't defer. When I would pay over minimum payment on my private loan (no matter how specific my instructions were on my check and payment coupon, like writing "apply only to Loan #X, do not apply to interest on any other loan") they would take any extra and apply to the lower interest on my other loan, which I'm trying to just leave alone, chilling at their low interest rate.

We did this dance for about 3 months where I would call, complain and they would re-distribute the funds the way I wanted, while saying there was no solution. UNTIL I TALKED TO THE MAGIC CUSTOMER SERVICE PERSON who CRACKED and told me about the "exceptions payment adress" - a different address to which you can send your payments at which, allegedly "a real person opens all the mail" - that was really her description. I've been sending my payments there for a year and now they always go exactly where I want them to go. This is where I send my payments:

Student Loan Corporation c/o Citibank
8725 West Sahara Ave
Attn: exceptions payment mail zone 1225
Las Vegas NV 89117

Good luck

ps, I always send in the payments a few days earlier now, figuring it takes a wee bit longer for a "real person" to process it, and don't want to give them excuses to hit me with any late fees.

@GarretCalchas: There is no customer service anymore, only self-service. It's a do it yourself world.

You intend on repaying your student loans? After Med School I'm heading to Dubai..I mean, North Korea.

SHHHHH............

This website is all about being an informed consumer, right? Well now we are informed on how to properly pay extra toward the principle.

I suggest you call back and ask to speak to a supervisor. While this is not legal advice, the practice of denying advance payment on a loan to pay down the principle is illegal in most states. Some lenders try to get around that with an "early pre-payment fee," but that isn't what is going on here.

Try again. My suspicion is that the contact on the phone did not know how to process it, but a supervisor might.

@missdona:
i hate DIY

I'm gonna go with the "blame the OP" on this one, until further information is available. An off-cycle check with a letter, instead of a coupon, would likely be processed in the manner with the least risk if incorrectly applied to the account. That method is to treat the payment as a pre-pay rather than additional principal.
If the situation were reversed, someone would be crying that they have to come up with additional money to cover their payment since the off-cycle check was applied to principal.

@lostinalunchbox: I love you - do you just tell them to apply it to principal from Loan # XXX?

@veronykah:

That's exactly what I do and it works just fine for me. Not sure why the OP couldn't have just paid via the website.

I was under the assumption that the law states if a debt collector, that being the bank, doesn't accept a payment given, that they automatically void the debt and the debtor owes nothing more on it.

@supercereal: At least Citibank gives you the option, I had a Wells Fargo loan that was hell for 6 months to try and put principal payments on.

@rpm773: "it sounds like that can be done without signing up for automatic payments."

I have been fighting with them about this for over a year. In THEORY you don't have to sign up for automatic payments or electronic statements, but it MAKES you sign up and then opt out. And then won't let you opt out.

@veronykah: Why shouldn't she be able to send them a check in the middle of her billing cycle when she gets $2000 and wants to put it towards her student loans? Restricting you to ONLY being able to pay when they say so during your billing cycle is a little odd.

@Esquire99:

Instructions don't matter with CITI. They have an automated processing center, and they discard written submissions. They have a super-double-secret address that can't be found on their website to which you can send payments with instructions.

Citi did this same thing to me. It's a fuckin' ripoff.

@Batwaffel: Sounds like an urban myth along the lines of dead roommate = free pass all classes.

they don't want to accept the principal paydown because it reduces their long-term profits by giving them less principal to assess interest against each payment cycle.

Unfortunately we don't know exactly what her note to Citi said. The way it reads in her letter to Consumerist, Citi DID do what she asked them to do. There are two ways they could have reasonably interpreted her letter -
1. She wants to make an additional payment
2. She wants to make a partial payment from a different source (or even from the same source; some people make partial loan payments twice as often for budgeting reasons and because it saves a little bit on interest).

She wanted to do 1, they interpreted it as 2. If she had sent the exact same letter but had wanted to do 2 and they did 1, you can bet the Consumerist would be criticizing them for that too.

Moral(s) of the story -
1. Be explicit and specific in your communications; make your intentions clear; the person on the other end may know a better way to accomplish what you're trying to do.
2. Don't just send a note to a monolithic corporation and expect everything to work out the way you want it to work out. Pick up the phone and find out the proper way to do what you want to do.

Hey Consumerist, why don't you take the opportunity to educate your readers instead of jumping straight into the knee-jerk criticism?

@Batwaffel: What does that have to do with this story? They accepted the payment. I too think you've fallen for an urban legend.

@Shane Elliott:
If Valori did the math, she'd probably find that they DID deduct it from the principle.

@CornDoc:

Hey there, quit being logical

@CoarseLive: This place sounds so untrustworthy that if I were in the OP's situation, I'd just go right into one of their buildings so I could talk to a human and make sure it gets done right.

Of course we all know that doesn't always work, but I'd at least try.

@I_am_Awesome: They accepted it but didn't apply it where it was supposed to go.

@pancakeman: Customer service people don't work in stores, high pressure salespeople do.

@Eyebrows McGee (on Twitter: LPetelle): The issue is they wouldn't apply the extra to the principal only.

-BUT- As the screenshot of the website shows, they collect any interest that has accrued since the past payment first, then the rest goes toward principal. This is standard practice.

@Shane Elliott: You do know than when you actually follow the instructions for applying payments to the principle balance, they actually do apply it as you requested.

@Eyebrows McGee (on Twitter: LPetelle): You can essentially pay whatever additional money you want, whenever you want, using the online system.

Though you can't seriously expect a largely automated mail processing system for a giant corporation to heed an unsolicited, unexpected, completely random letter. Call beforehand to know what steps to take before deciding to send a note that they will 100% not read.

They use standardized payment coupons for a reason -- to cut down on overhead of actual people opening and processing each piece of mail. If that were the case, your interest rates would undoubtedly increase.

Wait, something is wrong with the story.

We're all about to see more money in our paychecks thanks to lower payroll taxes

States, counties, and cities are RAISING taxes to balance their budgets, since unlike the feds, they can't just print what they need. I'm getting a 25% property tax increase a 10% sewer rate increase, and a 1% income tax increase. That fed cut won't even make a dent in all of that. :(

I noticed that my student loan company doesn't apply extra payments to principle.... they just push my next payment date further and further off into the future until one magical day there will be no payment. They're probably hoping that I'll take a few years off from making payments.

@johnarlington:

Advancing the next payment due date has nothing to do with where the extra payment was applied. With my student loans, any payment goes to principle. If I make a payment that is enough to cover two or more payments, I am allowed to advance the next payment due date. Regardless of whether I advance the next payment due date, the balance of my loan is reduced by the total amount of my payment. If I wait two months to make the next payment, two months of interest will have accrued - interest always accrues until the loan is paid off. BUT the two months of interest will be based on the newly reduced balance.

I don't know if your loans work the same way, but the fact that they advance the due date has nothing to do with whether the principle was reduced. I suspect that if you continue to pay ahead of time, you will end up paying less interest than if you had made the payments on their due dates. If that is the case, then yes, the payments were applied to the principle.

@dragonfire81:

I think they did apply it to the principle; the fact that they reduced her next payment does not indicate that her payment wasn't applied to the principle.

@weave: We're having a vote to increase the property taxes in May (they can't increase more than 2.5% per year in MA without a vote), menu style. You can vote for the library and against the senior center or vice versa, etc. They're also talking about raising the gas tax $.14 - $.19/gallon. This is because the road system is so bad due to the Big Dig, they want to DOUBLE the toll costs on the tunnels. They got the Pike to delay that, for now. It's insane out there but if you saw the condition of our roads and our school systems, you'd cry.

@supercereal: While what you say is true it only points out the real problem. I would much rather pay a little more interest then deal with these large bloated corps. After all the complaints and watching how these to large to fail idiots tetter on the edge I am thankful that I made the decision years ago to deal locally as much as possible.

Mega banks are junk. No customer service, they, like insurance companies think they own you and your wallet. I loved it when I pulled my savings out of Chase, after they took over WAMU, it was like I was taking their money. They are nothing but greedy thieves and need taken down.

I don't want to be the spelling police, but since some comments contain the word spelled incorrectly multiple times, I just feel the need to point it out:

principal = "a capital sum, as distinguished from interest or profit"

A principle is broadly "a rule of action or conduct" or "a fundamental doctrine or tenet"

Brought to you by dictionary.com

Thank you.

Surely she doesn't believe they don't want her money! Of course they do! Which is why they want to make it superhumanly impossible to pay down her principal. Then they can keep bleeding her slowly with the interest.

I understand the issue...she says she has 3 different loans, you can't choose which one you want to pay the principal on if you choose to check the box. My Sallie Mae loans are the same way. They grouped all of mine together despite having very different rates and paying the principal on ANY, nevertheless on a specific one is next to impossible. I try to pay down my highest interest one first, they no likey.

The extra payment did help.

By receiving part of the "scheduled" payment early, the principal was reduced before the scheduled payment date, thereby reducing (ever so slightly) the amount of interest to be computed for the month.

The money was applied. The OP just didn't get all of the extra boost desired because only part of the scheduled payment was applied this month.

Next time, give the bank better instructions (this payment is to reduce the principal, please apply the scheduled payment per the contract).

@I_am_Awesome:

Damn, you are so right.