Heather,

Thanks for this great resource.  I appreciate your time and effort. 

Four separate Graduate Plus loans I took out were recently purchased by a new company.  Let’s call them Company B.  I received my first contact from Company B on March 27, 2012.  That document specifically stated that it was not a bill.  It explained that Company B administered my loans which Company A previously had. 

Then, in early April of 2012, I believe April 7, 2012, I received a bill stating that I had missed a payment.  A $27.49 late fee was included in my bill due on April 14.  I was shocked because it was my first bill, but I paid more than the amount requested in order to deal with the matter immediately.  I noted in my payment that the late fee was erroneous as I had not received a bill before.

The same occurred in May, June, and July.  In each instance, I paid more than the fully requested amount (more than enough to cover the total, which included the $27.49 late fee) noted a protest asserting that the late fee was inaccurate.  I called several times but was unable to get an operator. 

Finally, in early July, I was able to speak with a representative.  I explained that I kept receiving these notices of late payments, kept paying the bill in full and on time, and still received a late fee notice the next month.  I inquired as to how that could be.  I was told that I missed a payment with Company A in December of 2011.  This was the first I had heard of the matter.  I don’t believe that I missed a payment of any bill I received.  I was not called about the missed payment.  I do not believe that I was assessed a late fee by Company A in January, February, or March of 2012. 

I stated that I didn’t understand - that I didn’t believe I had missed a payment, but that if I had I needed to see some documentation on it and to be told the full amount I was in arrears.  As I saw it, if I had in fact missed or made a late payment, I would think the fact that I paid the total, inclusive of the late fee, should be sufficient.  I was told that because I was on an IBR payment, that wasn’t the case.  I asked what that meant and wasn’t given any information. 

I asked why I was being continually assessed a late fee instead of having someone explain to me the supposed problem or being flatly told of how much I owe.  Again, I was told that I wasn’t given the full amount of what I owed because of IBR.  I asked how much I owed the company allegedly, and was told $27.49.  I said that obviously wasn’t correct, because it was the amount that I am being re-assessed month after month.  I demanded some documentation on the amount due and the missed payment, but to no avail.  I specifically said that I wanted to know how to pay off the fee because it shouldn’t just carry over.  I was told just to mail in my monthly payment (which obviously does not work). 

I checked my Company B payment history online.  It reflected that even when I paid the full amount, including the assessed late fees, the entire amount was put towards interest.  So, even when I paid the full amount including the late fee, nothing was being put towards the late fee.  For instance, in May, my payment allegedly should have been $462.51, plus $27.49 for a late fee, with the total due being $485.  I paid $500, but the full amount was put towards interest.  None was put towards fees or principle. 

I attempted to find my payment history with Company A insofar as it relates to my December 2011 payment, but it is no longer available online. 

From this background, I have several questions/comments. 

1)  How can I obtain documentation regarding my December 2011 payment history from company B?
2)  If I have missed a payment, do you have any approaches you think may be worth consideration?  How can I obtain information regarding the full amount of the loan?
3)  Is it legal for company B to assess a late fee and, when I pay it, for company B to put the entire amount towards interest?  I believed that even under IBR, it was fees, then interest, then principle.  Whatever the answer is, could you provide a citation to USC or CFR if there is one (I would like to recite it to them).
4)  Are you familiar with any way in which the same recurring monthly late fee could be assessed again and again (even when all records show that the current payments were made on time)?
5)  I am growing more and more suspicious that this company is mismanaging funds intentionally or with reckless disregard for accuracy - if I believed I had sufficient evidence of that, would Dept. of Education’s OIG be the proper office to contact?

Thank you so much for your time!

I’m sorry you are facing this situation.  What a supremely frustrating scenario!  I’m afraid I can’t give you information specific to your particular circumstances, in light of the restrictions associated with the practice of law (my license is in NC).

Here are some things to think about:
start communicating in writing (snail mail best) and keep copies
request the account records you want from your loan servicer in writing
check your accounts on http://nslds.ed.gov
if you can’t get things resolved with your loan servicer, contact the office of the Federal Student Aid Ombudsman: http://www.ombudsman.ed.gov/

Problems with loan servicing are far too common.  Check this out from my friends at the National Consumer Law Center: http://www.studentloanborrowerassistance.org/2012/01/26/operational-problems-at-the-department-of-education-what-is-going-on/

As to question three, a loan holder can assess late fees to borrowers in accordance with 34 CFR 682.202(f).  Your monthly payments are likely not satisfying the late charge that you incurred because, under the IBR plan, all payments received first satisfy interest, then late fees and colleges charges, and then principal.  See 34 CFR 682.215(c).  If your payment is less than accruing interest, which is called negative amortization and occurs frequently in the IBR plan, then your payment will not satisfy the late fees until your loan stops negatively amortizing.

For example, if you have a $50,000 loan at 6.8%, $9.30 accrues in interest on the loan each day, which is about $279.26 every month.  If your monthly IBR payment is only $250, then $29.26 sits out there on your account.  The next payment of $250 satisfies the remaining $29.26 from the prior month, and only $191.48 of the interest that accrued in the subsequent month is satisfied.  Because there is now $58.52 outstanding in interest, at the end of the second month, the late fee is still not satisfied.  Note that this example does not include the interest subsidy for borrowers with subsidized loans.  If you have subsidized loans, then the difference between what accrues on the subsidized loan and what you pay under IBR is paid by the Department of Education.  Nevertheless, the example illustrates how payment application works.