We get a lot of correspondence from people who think they paid off their loan when they really didn’t. With these four things in your back pocket, you won’t make that or other common mistakes.
1. Your current principal balance is different than your payoff
Interest accrues separately from principal and only in certain situations (such as after a forbearance, deferment or grace period) does it get added. As a result when you make a payoff you need to not only have the current principal balance you typically see but make sure all interest is included as well.
2. You can save money by paying over the phone or online
Whenever you mail in a payment a servicer will come up with a 10 day payoff which adds 10 business days of interest. This allows time for the payment to arrive and process. If you make a payment over the phone or online your payoff date will be the next banking day. Depending on the size of your loan and daily interest this can cause some significant savings.
3. Your account won’t show as paid in full until approximately 60-90 days
Your loan has to sit in a $0.00 balance for a given time period before it is said to be Paid In Full because once it is deemed “Paid In Full” it is legally binding. Borrowers have the right to unauthorize a payment for 60 days after it is made. Once this time period has passed it is reported to the Department of Education that will take often times up to 30 days to change the status. During this time your account will show as in Repayment and $0.00 so no interest will accrue.
4. Your refund will come after that
Once it is reported to the DOE, they will look and see if there is a refund needed. This will be sent to the treasury who issue a refund using the method you used to make the payment (i.e. if you paid by check you will receive a check)