student loan

How to Payoff your Nelnet Student Loan

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Well, it’s time again to do one of my favorite things: Write up a post on making a final debt payment.  I did one for when I finally paid off my last credit card here and now I can do one for my Nelnet Student Loan.  (I’m talking strictly the steps needed to take to pay off the loan.  If you want to know How to Pay off debt, check out this post)

This loan and I have kind of had a rough history.  When I first had to start paying back my student loans, I thought I only had 2, and didn’t know about this one until I got a missed payment note in the mail.  Whoops! I remembered taking it out, but I had figured that it had been lumped in with my other loans.  Unfortunately it wasn’t, and that is one thing that really bothers me about student loans.  Many students have payee’s coming out their hind parts, and consolidation isnt always the right move.  It wasn’t for me because I was planning on paying them off in a few years, and once I did that, it wouldn’t matter.  I also had some very low interest rates on my student debt, and some were subsidized as well.  I would rather just pay 1 person, but that’s just me.

With this loan specifically, I’ve gotten questions on it before regarding the payoff schedule.  In short, a reader wanted to know what nelnet did if extra was paid on the loan.  Short answer: They moved your next due date forward to get their (interest) money.  He also asked me what happens when you pay off the loan.  Here’s what I did to to pay it off.  (I tried calling, but was told to go online)

First, you need to log in to your nelnet account.  You should already know how to do this if you’ve been making payments to your loan thus far.  Once you’re logged in, go to the My account tab, and you should see this:

Pay off nelnet

As you can see, after I made the big payment at the beginning of this month, it pushed my due date into 2014.   I don’t want this stupid little thing hanging over my head (and accruing interest) until then.  I want to pay it off.  Above the box, you’ll see I’ve circled the “click here” to obtain your 10 day payoff quote.  Once you do that, it will take you to another page that will tell you how much you  need to pay them in the next 10 days for them to consider the loan paid in full.  It takes into account interest that has accrued on the loan that is outstanding, estimated interest over the 10 day period (I’m assuming this was more relevant when people paid bills by paper check and snail mail) and the current principal balance on the loan.  Here’s what mine looks like:

Pay Nelnet

So, I can happily say that I submitted the online payment on 10.21, and it has cleared the bank.  Since this is the first student loan that I’ve ever paid off (but  not the last, rrrrgh) I was curious as to what would happen next.  Would I get a letter from the servicer saying that it has been paid off ?  (Not sure, but I don’t think so)  Would my credit report score improve? (not sure on that either) Would I have not sent the right amount and owe them something ridiculous like 32 cents?  (not at all).   After the payment clearing the account, here’s what my “My Account” section looks like:

Nelnet Loans

I now have a $0 amount outstanding – it’s awesome!  Here’s another shot of the group summary.  This is what you’ll want to see when you’ve sent them the final payment.  Notice on the “status” it says PIF by borrower, Paid In Full.  Not sure why it still shows me needing to make a 38 dollar payment, though.  Here’s the shot:

nelnet4

There is the process to pay off your student loans.  Make sure to keep your focus and you’ll be here in no time!  Good luck, and if you have any questions, contact me or leave them in the comments.  I’d be happy to answer them.

Reader Question: Nelnet Student Loans

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I just recieved this question from Tim who writes over at The Econ Man:

Hello. I just ran across your blog and in reading this post, thought that maybe you would be able to help with a question I had about paying off loans early, and specifically nelnet loans. With nelnet, I’ve never seen the option to apply extra payments “towards principle.” I contacted them and they told me if I wanted to apply the extra toward the principle, I would have to mail in a check with those special instructions. I’m just not sure what happens if I pay extra without specifically telling them to apply it toward the principle. Do you know? I see that you’re paying off a nelnet loan and you don’t owe payments until April 2012. What happens when you finish paying off your loan? Is the loan paid off immediately, or does the original loan amortization schedule still play out?Have you paid any other nelnet loans in full? this simple thing really confuses me and it’s prevented me from paying extra on any of my nelnet loans.

Thanks,

Tim

As Tim mentions in the article, I do have a student loan from nelnet, and it’s currently my debt repayment target, because it’s the next lowest balance.   (I paid off my credit cards first, even though some of them had higher balances than this loan).  I mentioned last time that I made my first snowball payment to them (the amount was around $1,000) and then noted that I don’t have a payment due until April of 2012.  That means that they have tentatively applied my extra payments as “prepayments” of the balance due, and not applied the extra payment to the principal.  They pitch this as something helpful, but in reality it’s not.  Sure, if I lost my jobs I wouldnt have to pay them until April 2012, but I’d lose so much progress that I’ve made.

Nelnet actually does apply your prepayments to the principal, as you can see in the table below.  Most of the student loans that I have work in the following way:  You’ll pay them some amount (be it your regular payment or otherwise) and they will take that amount and pay off the interest that is currently owed on the note and will apply the rest to principal.

To explain an example from the table, my  normal payment is $50.  On June 7, 2010, I paid them $50, and there was $18.31 worth of interest on the note at that time.  Subtract the $18.31 from my $50 payment, and you’re left with $31.69, which they then applied to principal.  Similarly with my snowball payment of $1,000 on August 2, there was 15.17 worth of interest on the loan, and once that was paid, they put the rest towards principal.

08/02/2010 EDPay $1,000.00 $0.00 $15.17 $984.83
07/06/2010 EDPay $40.00 $0.00 $16.42 $23.58
06/07/2010 EDPay $50.00 $0.00 $18.31 $31.69
05/06/2010 EDPay $50.00 $0.00 $17.35 $32.65
04/06/2010 EDPay $60.00 $0.00 $15.83 $44.17

The way they (can) make back the interest that they lost is by telling you that you don’t  need to make a payment until April, 2012.  If you do this, all the interest that you didn’t have to pay now will accrue back onto the note if you don’t make a payment.  However, if you kept making payments, you’d pay off the note early.

Once you get close to having the balance almost paid for, you can request what they call a payoff quote (to find this for nelnet, click on “My Account” and above the payment info should be a link).  A payoff quote is basically a quote that says the current principal balance, the interest accrued currently, and estimated interest for the period that the quote is good for.  For example, nelnet will give you a payoff quote that is good for 10 days.  If you send them the money in the next ten days, your loan is paid in full.  Mine looks like this:

Current Principal Outstanding Interest 10 Days Interest Total Payoff Through 9/13/2010
$2,033.40 $12.11 $3.79 $2,049.30*

So if I paid Nelnet $2,049.30 before September 13, my loan would be paid off (unfortunately I don’t have the resources at this time to do that).  Once this is done, the amortization schedule does not continue to play out.  You’ve excised the company from your life (if you only have 1 loan through them, like me) and you don’t owe them another red cent.  You can safely completely forget they ever even existed and move on to your next debt.

As far as paying any Nelnet loans off previously, I have not.  I will soon though, and I’ll let you know exactly how it goes if you like.

In my opinion, handling prepayment needs extra discretion and a clever planning. You can dig up some useful information about payment schedules of different student loans at Loans-advisor.com