What to Do About a Surprise Student Loan Bill

Alicia Adamczyk yesterday at 23:41. 0 comments
Zombie Debt Student Loans Money Personal Finance Loans Debt

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.

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