How can I pay down just my unsubsidized student loan?

July 18, 2014 7:57 AM

I have two loans, one subsidized one unsubsidized federal student loans with AES. AES will only allow me direct my payment to both loans in total: they will not allow me to specify what percentage of my payment goes to each loan. How can I fix this?

I'd like to pay off my unsubsidized loan because they're both going to be in deferment for 5-6 years. Is this a federal law thing? An AES thing? What gives?

posted by MisantropicPainforest to Work & Money (18 answers total)

I was able to pay off my unsubsidized loans first (I forget who the servicer was, this was about five years ago), so this is definitely an AES thing. Are you only trying to do this online? Have you called them to ask if you can do this?
posted by peanut_mcgillicuty at 7:59 AM on July 18, 2014

Have you called them personally? This is not an unusual request, especially while they are in deferment.
posted by Think_Long at 8:09 AM on July 18, 2014

Response by poster: Thanks! I did call them years ago and they said it couldn't be done. Kinda pissed because I just called and they said I have to do it by mail with specific instructions, every month, until it is paid off. Bullshit if you ask me.
posted by MisantropicPainforest at 8:15 AM on July 18, 2014

It is, indeed. I recommend continually checking your statements to make sure the payment is applied to the correct loan - servicers have been known to mix them up in the processing. Not maliciously, just because they are processing so many.
posted by Think_Long at 8:26 AM on July 18, 2014

AES pretty much plays by their own rules, unfortunately. My son has a school loan through them, and has been trying to meet their requirements to get his mother off the loan as cosigner. Let's just say the goalposts seem to be somewhat mobile.
posted by Thorzdad at 8:27 AM on July 18, 2014

Response by poster: I think I'll just raid my Roth IRA and pay down the smallish unsubsidized loan in one fell swoop so I don't have to deal with them.
posted by MisantropicPainforest at 8:31 AM on July 18, 2014

This seems shady as heck, and since federal loans are involved, it might the kind of thing that your local Congressperson might be interested in. Probably couldn't hurt to let AES know that you've reached out to Congress - they've got a pretty sweet deal going and would hate to have Congressional attention mess it all up.
posted by burden at 8:32 AM on July 18, 2014

Basically, they are not allowed to do this, but they can get away with making it as difficult as possible--so, you can do it, but not through their website. You do have to do it by mail with specific instructions. I made up a letter and printed off 12 copies, and then I just write a check every month and stick it in the envelope with the letter. It's totally dumb and a minor hassle but the stamps are still worth the interest I'm saving by doing it my way.
posted by epanalepsis at 8:44 AM on July 18, 2014 [3 favorites]

I think I'll just raid my Roth IRA and pay down the smallish unsubsidized loan in one fell swoop so I don't have to deal with them.

Did you run the numbers to make sure the math works out on this? The point of paying off the unsubsidized loan is to save you money, you don't want to lose money just to save yourself a minor hassle. I hate to even write this, but back in the day, everyone wrote checks for everything.
posted by epanalepsis at 8:48 AM on July 18, 2014 [1 favorite]

My student loans are now serviced through MOHELA and I asked them the same question as to why I couldn't do it online. The response was that since my loans were consolidated I could specify which loan to allocate a payment to but I'd have to call in after making a payment and have them allocate it manually...every...single....time.
posted by eatcake at 8:54 AM on July 18, 2014

Response by poster: Did you run the numbers to make sure the math works out on this?

Well my interest rate is 6.75, so unless the return on the market is higher than that I'll make out, right?
posted by MisantropicPainforest at 8:57 AM on July 18, 2014

Well my interest rate is 6.75, so unless the return on the market is higher than that I'll make out, right?

Not necessarily. One of the biggest advantages of a Roth IRA is that you don't pay taxes on the money when you take it out. I am assuming that you are fairly young since you have student loans in deferment, and if so, you will almost certainly be paying MUCH higher taxes when you retire-if nothing else, because the tax rate will have increased by then. Unless your loans are enormous, leave the money in the IRA.
posted by Missense Mutation at 9:24 AM on July 18, 2014

AES ranks number 2 in complaints against them to the Consumer Protection Finance Bureau. Sallie Mae, who holds my leash loans is number one, joy of joys.

Do complain.

I am most unfortunately resorting to the mailing an extra check every month with specific instructions (apply to loan #123456, do no forward payment (as their website automatically forwards payment with any extra payments), etc.). If you print up a whole bunch ahead of time and fill out a stamp a bunch of envelopes, all that's left is writing the check. I was going to do it through my bank automatically but there's nowhere to give specific instructions with it.
posted by carrioncomfort at 10:04 AM on July 18, 2014 [1 favorite]

I used to work for a student loan servicer and it was not an unusual request to apply payment to one specific loan, which we were happy to do as long as both loans were already being paid on time. So I agree with the other responses that it is super weird that AES won't do this. I would recommend mailing a request in writing with a check as epanalepsis suggests.
posted by Librarypt at 10:26 AM on July 18, 2014

Please get anything AES tells you in writing. Have them send an email or letter with specific instructions on how to designate your payments. I got screwed over because AES lied to me and I didn't have documentation. Don't make that mistake.
posted by entropyiswinning at 10:37 AM on July 18, 2014

Here is the AES page on targeting payments. If the online interface does not work for this, then send the payments by mail.
posted by melissasaurus at 10:43 AM on July 18, 2014 [1 favorite]

I use AES, and my loans are currently in deferment. I just logged in now and was able to specify payment amounts for each loan, in exactly the way the instructions melissasaurus linked to indicate. I was also able to specify payment amounts for each loan back when I was actively making payments and paying extra on my loans.

You may want to give their customer service a call. I have generally found them pretty helpful, at least for simple questions such as this.
posted by unannihilated at 11:10 AM on July 18, 2014

I was able to make this happen by mailing a check and directing the payment to a particular loan.
posted by unreasonable at 11:11 AM on July 18, 2014