LOADING ...

What to Do About a Surprise Student Loan Bill

Alicia Adamczyk Feb 09, 2019. 10 comments

If you’ve paid off a student loan, you know how euphoric it feels to send in that last payment. You’re so happy to be free from the loan’s weight you might throw a party to celebrate, book the vacation you’ve been wanting to take and, of course, toss all of the mail from your servicer to rid yourself of the bad energy.

Just be sure to double check that you’ve actually paid every last cent off before you get rid of your documents.

Student Loan Hero details what happened to Americ McCullagh, a borrower who thought her $40,000 debt was paid off, only to have it come back to haunt her a decade later:

“I got rid of most or all my (files) about my student loans,” said McCullagh, who went to school for six years to get her occupational therapy degree. She remembered thinking: “Why would I need it? It’s over.”

Eleven years later, however, McCullagh’s lender started sending her notices about outstanding dues. At first, she trashed these Sallie Mae envelopes without giving them much thought. When the mail started piling up, however, she unsealed one to receive an unfortunate surprise.

Sallie Mae claimed she had paid off all her debt — except for about $150. After more than a decade of interest had accrued and capitalized, her balance due approached $12,000.

After eight hours on the phone with Sallie Mae, McCullagh discovered the debt hadn’t been paid off because of the timing of her last payment. “Her bank paid off her loans a few days after Sallie Mae had imposed that $150 of interest,” Student Loan Hero reports. And that $150 snowballed into $12,000 over the next 11 years.

What to Do About a Surprise Bill

Clearly one issue here is that McCullagh didn’t open letters and notices from Sallie Mae. You need to open your mail , particularly from financial institutions.

But there are other ways to check before you’re hit with an inflated bill. If you have federal loans, you can look up your balance on the National Student Loan Data System. This is also useful to check if you’re being scammed: the NSLDS lists your servicer, so check that against the company mailing you, Student Loan Hero recommends. And once you’ve paid off a loan, schedule a “check in” a few weeks or month into your Google cal. It takes a few minutes, but you can ensure you haven’t been hit with any sneaky interest payments or fees.

If you have private loans, you’ll need to call your servicer. It’s a pain, yes, but it’s a pain that’s likely worth $12,000. You can also check your credit report to see any outstanding loans.

And if you do receive a letter saying you still owe money when you’re sure you’ve paid it off, Student Loan Hero recommends sending a response to the letter sender:

You’re best off sending a debt validation letter. The Consumer Financial Protection Bureau offers a template letter for this very scenario.

In the letter, request the loan’s complete history, plus a written explanation for your outstanding balance. And, of course, keep the conversation in writing so that you have a formal record.

Finally, ask for a loan payoff balance statement from your servicer as soon as you’ve paid off your debt. That way, you’ll have written proof that you’re free and clear.

10 Comments

Other Alicia Adamczyk's posts

You Don't Own the Music, Movies or Ebooks You 'Buy' on Amazon or iTunes You Don't Own the Music, Movies or Ebooks You 'Buy' on Amazon or iTunes

When you purchase music, movies or books from Amazon or Apple’s iTunes store, you might be under the impression that that material is yours to enjoy forever; that’s how CDs and paper books work, after all. Why rent You’ve Got Mail for $3.99 every few months when you can “own” it and watch it whenever, forever, for $9.99?But you’d...

What to Do With All Your Stuff That Doesn't 'Spark Joy' What to Do With All Your Stuff That Doesn't 'Spark Joy'

It’s Marie Kondo’s world now, and we’re all just trying to declutter in it.After Kondo’s Netflix show Tidying Up with Marie Kondo, based on her book, The Life-Changing Magic of Tidying Up , debuted this month, Americans have gone tidy-crazy. Local and national news sites are reporting that thrift shops are seeing dramatic upticks in donations this month, likely...

The 2019 FAFSA Deadline Is Approaching The 2019 FAFSA Deadline Is Approaching

Submissions for the Free Application for Federal Student Aid are due June 30. If you want to access grants scholarships, federal student loans or a work-study opportunity, you still have time to fill out the FAFSA to qualify. (Remember, for federal aid, you have until June 30 after the school year to file. So this June 30, 2019 deadline...

Focus on Today, Not Just on the Future Focus on Today, Not Just on the Future

Of the many, many articles I’ve read and written about setting goals over the past few years, the one thing that’s stuck with me, that’s worked in my own life, is to focus on small actions you can accomplish today.You should absolutely set long-term goals and plans, but to be successful in accomplishing them, you need to take it...

Suggested posts

You Can Now Defer Your Student Loans While Undergoing Cancer Treatment You Can Now Defer Your Student Loans While Undergoing Cancer Treatment

Last year, a law went into effect that should allow cancer patients to pause their federal student loans while undergoing treatment and for six months afterward. But there was no way to actually request a deferment—until now. Here is the cancer treatment deferment request form, from the US Department of Education. To apply, you need a letter from your...

How to Claw Your Way Out of a Financial Pit of Despair How to Claw Your Way Out of a Financial Pit of Despair

When you decide to work towards a big financial goal, getting motivated at the start comes naturally. You’re excited to start chipping away. When you’re near the end of your money marathon, you get reinvigorated and start thinking of the endless possibility of post-goal life. But what about that seemingly endless part in the middle? How do you stay...

You Probably Don't Know Your Credit Card's Interest Rate You Probably Don't Know Your Credit Card's Interest Rate

Think about the credit cards in your wallet right now. Can you rattle off the rewards you earn for each of them? What about the interest rates: Can you list those? Turns out, 38% of us don’t know the interest rates for our credit cards, according to Nerdwallet’s 2019 Consumer Credit Card Report. Half of Nerdwallet’s survey respondents don’t...

Think About Your Finances in Terms of What You're Not Buying Think About Your Finances in Terms of What You're Not Buying

A lot of us think about our money in terms of what it can get us. When we’re earning X (or when we’ve saved X), we can purchase Y. But if you’re working towards long-term wealth—whether for financial security, financial independence, or retirement—it’s just as important to think about what you’re not buying.Yes, I know that sounds like the...

How to Avoid Getting Pickpocketed How to Avoid Getting Pickpocketed

Last year, several groups of pickpocketers profited off oblivious commuters on New York City’s subway system. “I open the purses, put my hands in, and take the wallets out,” one pickpocketer, who was eventually arrested and found with three Metrocards and four cell phones, told a detective. “I pick people who are distracted.”Pickpocketers often operate in groups (though not...

What's Going On With the Stock Market? What's Going On With the Stock Market?

The stock market has been exceptionally volatile this week—down, then up, then down again. The most recent drop was particularly steep; the Dow had its worst day of the year on Wednesday, when it dropped 800 points. (This came shortly after a previous “worst day of the year” on August 5, when it fell 767 points.)Yesterday’s drop was, without...

Tell the Consumer Financial Protection Bureau That Debt Collectors Shouldn't Text You Tell the Consumer Financial Protection Bureau That Debt Collectors Shouldn't Text You

In May, the Consumer Financial Protection Bureau proposed new rules for debt collectors . This update to the Fair Debt Collections Practices Act, which hasn’t been updated since its development in 1977, would limit how often a debt collector can call you each week and provide greater clarity for itemized bills. But it would also allow debt collectors to...

Early Wage Apps Are a Little Too Much Like Payday Loans Early Wage Apps Are a Little Too Much Like Payday Loans

Every time I settle in for an hour or three of on-demand television, I see ads for Earnin. In one of them, a savvy older-brother type tells the person behind the camera that he needs to stop asking to borrow money and instead get the Earnin app. “You can access your money that you earned, without any fees or...

How to Protect Your Savings From Falling Interest Rates How to Protect Your Savings From Falling Interest Rates

The Federal Reserve cut the federal interest rate on July 31, and—as predicted—banks are starting to cut their interest rates as well.These lowered interest rates affect both savings accounts and CDs, as MarketWatch reports:An analysis of Federal Deposit Insurance Corp. data by behavioral economics consulting firm Analyticom found that rates for certificates of deposits (CDs) are falling across the...

The 10 Best Financial Rules of Thumb The 10 Best Financial Rules of Thumb

Rules of thumb can be a good approximate guideline for decisions, and there are tons of money rules that aim to get your finances on track. While everyone’s situation is different, these serve as a good starting point.We thought we’d put together a list of some solid, useful rules of thumb to follow. However, since everyone’s situation is different,...

Language