After reaching a huge milestone like paying off over $100K in debt, it still pains me to think that the remainder of our debt is all student loans. Our remaining three student loan accounts are all housed by different providers, Navient, Great Lakes, and AES, so there are small nuances to each of them that we have to keep in mind. This post will go into more detail on how paid ahead status works, more specifically for loans being paid to Great Lakes.
A few weeks ago I shared how AES was not properly applying my extra payments to my loans and instead of putting me in “PAID AHEAD” status on my IG stories. Not surprisingly, I wasn’t the only one this was happening to, and many of you commented and sent me messages sharing your experience with the whole “PAID AHEAD” debacle. Luckily, I was able to have paid ahead removed from my AES account and now my payments are being credited correctly. Unfortunately for many, it’s not that simple.
What’s the deal with Paid Ahead?
I’ve gotten this question many times, and the answer is that it depends on your situation and your student loan provider whether or not this will be a good or bad thing for you. Like many companies, when you’re paid ahead, it means that you either don’t owe a bill for the upcoming month, or your bill will be reduced based upon how much of your extra payment was moved forward. For some, this can be a blessing because it gives them a bit of a reprieve from a monthly bill. For others, who are actively trying to pay off their loans as fast as possible this causes a huge issue, as the money isn’t being allocated to the principal balance.
Two Ways and Extra Payment Can Be Allocated
Being paid ahead can hurt you in ways that you may not even notice. As I’ve said a million times before YOUR STUDENT LOANS ACCRUE INTEREST DAILY. They accrue interest daily on your principal balance.
Let say your balance is $3025 and your minimum payment is $100. You decided to pay $150 this month. Of that $150, $25 went to satisfy accrued interest (which is always satisfied first), and $75 went towards your principal bringing your total balance down to $2925.
You now have $50 remaining. If this money were put towards you being “paid ahead” it would mean your next month’s bill would be $50 instead of $100. Your balance moving forward is $2925, and you will accrue interest on the $2925.
If the money went directly towards the remaining principal balance instead of being put in “paid ahead” your principal balance would decrease to $2875, and you would only accrue interest on that $2875. Meaning the amount of interest (basically free money you’re giving to the government) would be lower.
After my situation with AES, I decided to do a lot more research, on the whole, Paid ahead status with the loan companies. From experience, I can tell you this
Navient (Not Sallie Mae): extra payments directly applied to principle, no paid ahead status
AES: extra payments applied to paid ahead unless you specifically ask for that status to be removed from your loans
Great Lakes: Depends on your payment preferences (see below)
My Great Lakes student loan, the one we’ve been actively paying that started with at $88,000 balance went into repayment at the beginning of this month. Before then I was able to make extra payments and choose which loan I wanted my extra payment applied to without ever worrying about paid ahead status.
Now that we are in repayment with my first bill being due December 26 I decided to test out a few hypotheses to see if these loans would be affected by Paid ahead since we are in repayment.
Before we get into that, there are some essential things that one needs to understand how you can make a payment to Great Lakes. First, you can set an excessive payment preference, by going to the payment tab. Once there you can choose one of two options:
Standard Allocation: Once scheduled monthly payment and all outstanding interest have been paid, the excess will be applied to the loan with the highest interest rate, thus costing you less interest over time.
Custom Allocation: Once scheduled monthly payment has been paid, the excess will be applied to the specific loans of your choosing.
- You set manually.
This is how I’ve always set up where I want my extra payments to go. Since we have not consolidated our loans, I can choose which loan I want my additional payment to go to. I choose a CUSTOM ALLOCATION when making extra payments. You can divide up the extra payment among several loans are choose just one. Since we are focusing on paying off one loan at a time, I put 100% in the box for that loan.
The weird thing about Great Lakes is that it also lets you set this “Excessive Payment Preference” when you’re making a regular payment from the home screen.
Ignore all the “paid ahead” information as we’ll get that to that in a bit. Let’s make a payment on my $30,923 balance.
Notice, that I am making a payment of $20.00 to my loan. When doing so, I am also asked: “Are you Paying Extra.”
Since I’ve already set my EXCESSIVE PAYMENT PREFERENCE to custom Allocation, it doesn’t matter if I choose yes because my preference is already in the system. However, if you have not set you Excessive Payment Preference, it will automatically default to Standard Allocation regardless of what you choose moving forward.
YOU HAVE TO SET AN EXCESSIVE PAYMENT PREFERENCE MANUALLY BEFORE MAKING ANY PAYMENTS.
Just to recap before moving forward.
- You have to set up your excessive payment preference manually for your extra payments to go to the loan of your choice BEFORE you make your payment
- If you have not chosen an excessive payment preference, doing so while making your payment will not override the current settings. If it is previously set for Standard, it will default to the standard regardless of what you choose while making a payment
Okay, so now let’s discuss this paid ahead status with Great Lakes.
As you’ve probably noticed above it says that I am paid ahead until 01/26/2018. Based on what Great Lakes considers “Paid Ahead” this is true.
With my loan being in repayment my minimum payments every month for the next two years are $246.84. I hypothesized that if I paid extra on my minimum payment using “STANDARD ALLOCATION,” it would go into paid ahead status.
To test this, I set my payment preference for custom allocation, and I paid an extra $2.00 with my payment bringing my payment total to $248.84.
As you can see I am now paid ahead by $2.00 thus proving this hypothesis correct.
I then decided to test my next theory. I hypothesized that if I set my excessive payment preference to Custom Allocation, and choose to put 100% towards one loan, then the payment would be applied directly to that loan principal and would not just sit in paid ahead status.
I scheduled an extra payment of $20 to go towards the loan with a balance of $6,678.00. When the payment was applied, I noticed something interesting. Instead of being paid ahead by only $2.00, I was now paid ahead by $22.00! I then checked to see how may payment was allocated and sure enough the extra $20.00 was applied to the accrued interest and principal of the loan I specified.
By doing these test, I feel that I have a complete understanding of how Great Lakes sets their version paid ahead status. Again, this based on using the steps I listed above. With Great Lakes Paid ahead is an option and does not take away from your extra payment going towards your principal. By manually setting my excessive payment preference before making my extra payment I was able to target a specific loan and if I want, take advantage of the option to not owe as much on next months bill.
I feel comfortable moving forward with my extra payments now that I’ve seen how my payment is allocated.
If you do not have the options that I’ve shared above, call Great Lakes and inquire as to what needs to be done so that you can make extra payments towards the principal of your loans. Whatever they tell you, ask for that to be sent to you in writing before making any payments.
If you’ve been dealing with “Paid Ahead” status on your loans, share your story in the comments below for others who may be dealing with the same student loan provider.
Other Great Student Loan Post to Read from Broke on Purpose®
Is Refinancing Your Student Loans Worth the Risk?
Why You Should Start Paying The Interest Immediately on Your Student Loans
Wow this is so complicated. Great job of breaking this down for us.
Girl, these loan providers are really setting us up for failure. I discovered the same issue with a different provider a few years back.
Wow. I never knew that paying extra doesn’t always reduce the principle. Very, very sneaky loan providers. I have some work cut out for me. Thanks for breaking it down.
Wow, this was a great breakdown of the Great Lakes process. Paying several thousand dollars towards a loan only to see it show up as “paid ahead” is beyond frustrating. I will due some more research utilizing your theory before dropping another $5,000 that may not actually help me out.
Thank you for the time you put in as it will probably help many more folks going forward.
thank you for this clear and concise information
This was very helpful. Thank you.
I was actually paid ahead by $8000 and I was noticing that it wasn’t doing much advantage to me.
I called Great Lakes to find out that the only advantage to Paid Ahead would be that if I miss my payment, I won’t be penalized for it. But the interest is still accruing every day.
I requested them to regenerate my repayment schedule so I will have less payment due every month than what it is now, and whatever is left from that regenerated payment I can pay towards a specific loan with the highest interest. I felt like this was the only way to make anything out of my Paid Ahead status that had not been allocated correctly by my lack of knowledge half a year ago…
Thanks for sharing. The Great Lake site does offer some answers but they are, in my opinion, rather vague. Not many people know that to make an extra payment really count you have to do an “excessive payment” option. I’m glad you stumbled upon this post and I hope that it helps you moving forward.
In 2004 I consolidated 3 student loans. 2 federal stafford loans with AES and 1 Perkins loan. The consolidation was done by Sallie Mae. I paid every month for the next 8 years. Then in 2011 I was notified that my Segal Award for serving an AmeriCorps service term would be expiring soon and that I should use it. I contacted Sallie Mae and had it put towards my consolidated loan. They applied the whole amount to the principle and continued to send me bills. I asked them why I couldn’t have a paid ahead status so that I could be relieved of payments for a little while since I had just made a payment of more than $2000 and they said that they don’t do that. I continued to pay for the next 7 months before the strain got to be too much and I couldn’t pay anymore. Then in 2014 Sallie Mae transferred or changed their name to Navient. Navient immediately started calling me demanding payment. I told them to screw off because I thought it was an attempt at fraud. I never paid Navient. Then in 2016 they sent my loan to the guarantor and it was considered defaulted. This year I tried to get navient removed from my credit report because it had been 7 years since I made my last payment and thus when the default started and they won’t take it off because according to them I was in a paid ahead status until 2015. So they will continue to report negatively for 7 years after the paid ahead status was supposedly over. They are using this tactic to prolong a negative report on my credit.
Hey Melody!
I miss seeing your information on Instagram. I deleted my account. 😑 Anywho, would it be better just to put the extra money in an account where it can build interest and then when you get to a certain amount make a payment? I would still pay my monthly. With this being said this would result in the interest accrued being paid first then the rest would go to the loan of my choice(?), with the intent of paying it off if I have calculated correctly…instead of just seeing paid ahead on a account.
Hi Monisha,
I like how you’re thinking. It would be better, however, to pay extra on your loans instead of letting interest build while it sits in a savings account. Here’s why at max you’re going to accrue maybe 2% interest on a savings account when you could be getting hit with interest fee’s over 5% with your student loans. The more you pay on it the lower your balance becomes. With a lower balance, you end up paying less in interest overall. Your payment will always satisfy the outstanding interest before it satisfies any principle. Always pay you’re minimum and if possible pay extra.
I am paid ahead by thousands of dollars and I still have issues with paying excess. I still submit the same monthly payment each month but when I go in a few days later to pay an extra $50 based on everything you suggested, it does not apply it to the one loan I specified. I have tried to call MGL but they are unable to access accounts right now. It is something to do with the billing date or whatever. Do you know?
They are unable to access your account? Are your loans consolidated? If they are consolidated then you won’t be able to apply it to an individual loan. Keep calling them and have them explain how they apply your loan payment and how you can make an extra principal payment.
I had this same issue and found out it was because I was on auto pay. My auto payment was being taken out the last day of the month, so any extra payment I was making they were just applying as an early payment, even though I specified it as an extra payment. So it would treat it like it was my auto payment and would split it across the board and not be applied to the loan I wanted. Then, on the last day of the month when my auto payment went through, that would be applied differently and more of it would go to principal. So, I removed my auto pay which I also lost my interest rate deduction…. BUT all of my payments are going to principal except for the daily interest that had occurred to that date. It ended up helping me tremendously in knocking down my principal. Since I am in paid ahead status now every payment I make goes to the loan as an excess payment. Great Lakes is a complete fraud.
Emily,
The SAME thing is happening to me and it is very frustrating. I have called several times and now I at least have the direct number of a manager at Great Lakes. However, I am choosing to play their game so I can keep the interest rate deduction, because I have a loan total of 167,000 right now, so the interest rate deduction makes a difference.
This is great info!
I’m starting to accelerate my loans with GL and was baffled to see that my extra $100 was split over all of my loans instead of hitting the one that I specifically selected when I made the payment. I went back to my payment preferences and confirmed that 100% is targeted for the loan I selected. That’s really misleading that you have the option to choose and then it doesn’t take effect until the next month. I get that the companies have a vested interest in you NOT accelerating your repayment but this is borderline criminal. I sent an email through the site but will try and get them on the phone if the email doesn’t address the problem,
Ok, Got an email back from GL. It looks like it was because I paid 2 days after my Scheduled Monthly Payment (SMP) date. That’s on me. They applied the SMP amount to the previous month and the extra $100 as an “early payment” for this month. This goes back to my point about them having a vested interest in making it as difficult as possible for you to reduce the amount of money they make off of you. I am experimenting with AutoPay and an extra $100 this month to see if it can actually be done the way I want it to be done, i.e. pay extra money every month directly to the principal.
Here’s my understanding at this point:
– If you pay the full amount early and wait until your next SMP date you still accrue interest from the early payment date to your scheduled date. That will come out of your next payment and reduce the principal paid that month. That means a longer repayment and more interest paid over time.
– If you make multiple payments during the month, you will pay the daily interest accrual (APR/365 x days since last payment) before touching the principal This might be better in the long run but you’d have to do the math to confirm for yourself. A quick spreadsheet calculation on my end shows that making payments on 2 fixed dates each month will actually cost a few dollars more by the end of the year. Paying every two weeks might be better but will definitely be harder to calculate with the way their billing cycle works.
– UNCONFIRMED: If you reach your SMP at some point during the month, any excess payment *should* be applied to the token of your choice, minus the daily interest accrual on all loans since your last payment. See the point above about interest accrual and early payments.
– UNCONFIRMED: If you want to apply 100% of your extra payment to principal (for snowball or avalanche acceleration) you will have to pay the extra on the exact scheduled payment date.
Hi Melody!
I want to make sure I’m understanding this correctly.
Currently my monthly payment is $56. I make an automatic payment of $150. Does the extra $94 go towards my costum allocation, or do I have to make a separate payment the next day after my monthly minimum is due?
Thanks!
-Emily
Hi Emily,
Thanks for your question. For Great Lakes, you would need to first make your minimum payment. Once that post, you will go back and set it up for a custom allocation and then make your “additional” payment. Always split it up to be sure that the payments are being aligned to the proper accounts.
I would just add on that, to make sure you make your extra payment on the day your payment is due. That way your interest is all paid and all your extra goes towards principal. Also make sure if your automatic pay date isn’t on a weekend or a holiday. Because if it is and you go make an extra payment you won’t be able to choose your payment date but a date during the week. I have figured how it works after calling and paying a lot on my wifes student loans. Started at $82k and we’re down around $46k now. Can’t wait till it’s all over!!
They literally give you less then one day for you to make an extra payment and it be allocated as an extra payment… If you do it the following day they treat it like an early payment to your next month. Ofcoarse unless you get off autopsy and lose your Interest rate deduction. I HIGHLY recommend at least testing getting rid of auto pay and removing the interest rate deduction. See if it saves you money! It sure has saved me money. Now I have 100% control over my payments and how they are applied 100% of the time. Also my manual monthly payment is never split across the loans. I always get to choose now. It’s so worth it.
I’m paid ahead with AES through 2026. Yes 2026. They have me in paid ahead status and when I called about it years ago they claimed it was the only way to pay the loans off. I’m going to have the bill recalculated after all my paid ahead funds are credited to the principal. My loans will be close to paid in full.
Hi Melody, thank you for this breakdown. I have a question for you as well. I have a loan (or loans if you will) with GL. My repayment option is the one that increases every 2 years. My due date is the 27 of each month. As of now my due is $400, but I pay $250 on the 1st and $250 on the 15th (to minimize the daily interest) making me paying $500 monthly. I have a fairly “good” paid ahead status. I’m paid ahead until January of 2021, and the amount paid ahead is slightly over 10k. This month I received a bonus of $1,500 and wanted to apply that to one of my loan accounts with the higher interest rate (6.8%). I made the bonus payment to the excess payment selecting 100% to a specific account. The payment was made earlier this week. It got processed on the 28th. Then they deducted the monthly due ($400) and the rest ($1,100) went to the specific account. I wanted the $1500 to go to the specific account since I had paid my 2x $250 for the March already.
Long story, but wonder why they still deducted the monthly since it was paid already?
Hey, I would call them and let them know about you setting up the $1500 to go to a particular loan. This has happened to me before and they easily changed it so the credit went to the correct loan. Even though you paid an extra $1500 they will still take out the monthly payment because in theory it’s set to come out every month and any extra payments don’t negate that. I hope that answers your question!
It’s because they take your monthly payment out on the last day of the cycle. So any payment you make before that (all 30 days or so) they treat it like an early standard monthly payment. So they really only give you one day a month to pay directly to principal. It is absolutely ridiculous. Unless ofcoarse you get off auto pay and make 100% manual payments. You’ll lose your interest rate deduction but you will have 100% control of your payments 100% of the time. It will save you so much money. I have called the unfortunately too many times and unfortunately they would never reapply my payment properly. 🙁 But atleast now it is not an issue for me.
It’s because they take your monthly payment out on the last day of the cycle. So any payment you make before that (all 30 days or so) they treat it like an early standard monthly payment. So they really only give you one day a month to pay directly to principal. It is absolutely ridiculous. Unless ofcoarse you get off auto pay and make 100% manual payments. You’ll lose your interest rate deduction but you will have 100% control of your payments 100% of the time. It will save you so much money. I have called the unfortunately too many times and unfortunately they would never reapply my payment properly. 🙁 But atleast now it is not an issue for me.
Thanks for your comprehensive explanation concerning the “paid ahead” status of Great Lakes. I had some difficulty understanding their approach to this, even after a phone discussion with one of their reps.
Per your instructions above, I changed my excess payment allocation to custom, versus the standard allocation I had previous.
Thanks again for taking the time to write out and publish an explanation of a rather complex topic.
Do you happen to know how this works if your loans have been consolidated? I’m paid ahead by thousands, but it says my consolidated loan is ineligible for excess payment allocation!
Hi, is the loan through Great Lakes? If so I would give them a call to find out why it’s ineligible and how you can go about making extra payments.
What happens to the $2 paid ahead from the standard allocation? How is that applied? Or is it just “sitting” in paid ahead status?
I made a large excess payment using standard allocation and it did not seem to impact my balance whatsoever. This was before I learned how the custom allocation works.
How much of that payment was applied to the principal? The $2 in question was sitting in limbo available for use if I happened to not be able to make a payment the next month. You definitely don’t want that, you want all your payments to be applied to your balances. Sometimes the paid ahead will show even though the amount has been applied to future balances. Double check each time you make a payment to see where the money is going.
HI! I just found this and wanted to see if you could help before I call Great Lakes. I just logged into my account for the first time in forever. I noticed I am paid ahead by about $3700 and my balance is only $1464. Does this mean I should call and they can apply my paid ahead amount to the balance and send me the difference back? Or would I need to pay it off myself and then have them send me the full 3700 paid ahead amount back. I cannot find anything about if your paid ahead amount is greater than your balance.
Hi! So I would definitely call and ask them if they can use the amount you’re paid ahead by to close out your bill in full. What’s happening is that the “paid ahead” is creating a credit for you. Let’s say you weren’t able to pay the bill one month, what they’d do is pull that money from the paid ahead cushion. When you do call them, make sure you get everything in writing and confirmed so that there won’t be any questions later on! Congratulations!!
Thanks for the help! Having some extra money I didn’t know about will help a lot! Going to call them this week. I will make sure to get copies of everything and in writing.
Melody, Thank you for posting this article and having a platform for comments. I have been feeling very lost and confused by getting charged my minimum payment twice in one month since I am on auto pay. Reading others experiences makes it clear that the system is just broken. Just gives us more motivation to be rid of these student loans!!!
Hi Katelyn,
They definitely should not be charging you twice a month. I would call them to make sure that they haven’t “accidentally” set it up in their system for you to make two payments. This is your money. It is okay for you to ask questions and demand answers!
I have been through ALL of the same issues described here in the 6 years I’ve been paying to them, doing everything I can to pay them off quickly. Thankfully, I am down to 8k and can see the light at the end of the tunnel, and I’m pretty sure they have been fraudulent the entire time. I cannot count the number of time they have put me through the ringer. This servicing company is a joke and should be investigated imo. Maybe things are changing as I have noticed that they have put a lot more information on the accounts page than prior years to 2020. Cannot wait to end my relationship with them. Good luck to all!
Hi Melody, first off thanks for this article! I have a couple of questions I’m hoping you can help with because all my student loans are serviced through Great Lakes. With there being 0% interest on federal loans until October due to COVID-19, am I correct in understanding that any payments made until then would be considered excess since the loans are in forbearance? And if so, is it best to set up a custom allocation to make sure payment (assuming it is in fact, an excess one) gets put toward the tokens with the highest principal? I graduated in December 2018 so I haven’t been paying my loans off that long, but I’m lucky enough to still have an income and wanted to try and take advantage of this unique zero interest opportunity. Thanks in advance!
so if you have money categorized as paid ahead. How do you tell them to take that money and apply it to principal? I accrued over $3k before i realized this was happening. I want that money to get applied instead of “incase i miss a payment”. After this hits principal i’ll owe under a grand.
Hi! Give your student loan company a call. They should be able to do it on their end.