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How Payments Are Applied

Within your student loan account, you may have multiple loans. These individual loans may be grouped according to characteristics they have in common. For example, loans with the same loan type and interest rate may be grouped together.  

As you make payments on your student loans, it’s important to understand how those payments will be allocated across your loan groups. Understanding this will help you throughout your student loan journey, as you may find yourself wanting to make payments that are more or less than your current amount due. When a portion of a payment is applied to a specific loan or loan group, payments are applied to accrued interest first, and then toward the principal balance. 

When a portion of a payment is applied to a specific loan or loan group, it is applied to late fees first (if applicable*), then interest, and then to principal. If you are repaying under an Income-Based Repayment plan, payments are applied to interest, then fees (if applicable*), and then to principal. 

*The U.S. Department of Education does not assess late or returned payment fees.

You can direct payments (including partial payments) to individual loans or groups as a one-time or recurring special payment instruction. See Special Payment Instructions for more details.

Standard Payment Allocation

If you do not provide special instructions on how to apply your payment, Edfinancial will follow the standard allocation method: 

  • If a payment is made for the total amount due, it will be applied to the total amount due for each loan. 
  • If a payment is made in excess of the total amount due, the excess amount (also known as the overpayment) will be applied to the highest interest rate loan first. If you have multiple loans with the same interest rate, the overpayment will be applied to the unsubsidized loan(s) first, then to the subsidized loan(s). If you have multiple loans with the same interest rate and subsidy, the overpayment will be applied in proportion to those loans with a regular monthly payment.
  • Overpayments made to consolidated loans will automatically go to the unsubsidized portion of the consolidation loan. 
  • Payments received during an in-school**, grace, deferment, and/or forbearance period are applied to satisfy future installments only if your new monthly payment amount has been disclosed. 
     

Paying Ahead 

When you pay more than your current amount due, your due date on loan groups in repayment status will advance by one month each time you satisfy the regular monthly payment amount for that group (also called being “paid ahead”). There is no prepayment penalty, and paying your account ahead will decrease your total cost of borrowing and allow you to pay your loan off sooner. 

When a loan or loan group is paid ahead by one or more months, your monthly billing statement will show $0.00 due for that loan group. If you do not make a payment or pay less than your regular monthly payment amount for that month, you will not be considered past due. However, we encourage you to continue paying as much as you can, even if your current amount due is $0.00, because interest may continue to accrue on your outstanding principal balance. 

To maintain eligibility for borrower benefits and repayment incentives, you may be required to continue making monthly payments even if your current amount due is $0.00. For more information about overpayments or prepayments and how they qualify toward benefits, repayment incentives, or loan forgiveness, please contact us. 

If you plan to pursue Public Service Loan Forgiveness, please visit StudentAid.gov/PublicService for more information about prepayments and how a paid ahead status impacts qualifying payments. If you are repaying under an Income-Driven Repayment (IDR) plan, please note that your due date cannot be advanced beyond your annual IDR anniversary date; borrowers on IDR with a $0.00 payment cannot pay ahead to advance their due date.

You also have the option to instruct us not to advance your due date more than one month, as a one-time or recurring special payment instruction. If you select this option, we will only advance your due date a single month, even if you paid more than the current amount due. If your account is already paid ahead, selecting this option will keep your due date from advancing further. If you want the paid ahead status removed and your regular monthly payment amount to be due the next month, you can contact us. See Special Payment Instructions for more information. 

Payments Made Within 120 Days of Disbursement**

If you make a payment within 120 days of the date your loan is disbursed to your school, the entire payment will be applied solely to the principal balance of your disbursed loan. The payment is treated as a loan cancellation payment, and it will be made effective the same date as when the loan was disbursed. Any origination fee you were assessed will be adjusted based on the new, reduced principal balance, and less interest will accrue based on a smaller principal balance. 

Please note that when you view your account history via Manage My Account (MMA), a cancellation payment will show a payment date that matches the loan’s disbursement date. 

Special Payment Instructions

You have the option to provide one-time or recurring special payment instructions to direct your payments (including partial payments) and/or not advance your due date.  Some examples of special payment instructions are:  

  • You are making a payment in excess of the current amount due and you do not want to advance the due date more than one month.
  • You are making a payment and would like it to target it to a loan(s) or loan group(s).
  • You would like the excess payment (overpayment) applied across all loan groups in repayment status, instead of it being applied to the loan(s) with the highest interest rate. This will help keep the due dates aligned for all loan groups.
  • You want your payment allocated differently than the standard payment allocation method. 

If you provide instructions, Edfinancial will follow your instructions unless it would cause a loan(s) to be delinquent, or it is not permitted by regulations. Edfinancial will use your most recent payment instructions if there is a discrepancy between multiple instructions received. If we are unable to apply the payment as you requested, we will notify you. 

To submit special payment instructions, you can contact us using any of the following methods: 

  • Website: Log in to Manage My Account (MMA) at Edfinancial.com/MMA
  • Phone: 855.337.6884
  • Mail: P.O. Box 36008 in Knoxville, TN 37930-6008
  • Email: Visit Edfinancial.com/Contact to send us an email 
  • Billing Statement: Write one-time or recurring special instructions on the payment coupon attached to your monthly billing statement before mailing your payment.