Handy Debt Paydown Letter

Unfun fact: Did you know that many student loan companies will apply extra payments they receive to future interest and principal payments, instead of applying the extra payment to principal?

Because of these shennanigans, I’ve put together very explicit (no, not that kind of explicit) instructions in the letter I send with extra student loan payments.  I send two styles of letter.  First, here’s a copy of the letter I send when making extra payments that won’t pay off the loan completely.


<Today’s Date>

Re: <Account Number/Loan Number>

To Whom It May Concern:

Please apply the enclosed check for $<amount> to the account referenced above (my account.)  The enclosed check is to be applied to principal only.  If you cannot apply this check to principal only, or have any questions, please call me at <my phone number>.

Thank you,

<My Name>


I haven’t had any trouble with this letter so far.  If I were you, I’d only send one extra payment per month.  It prevents the good folks at the payment processing center from getting confused.  Secondly, here’s a copy of the letter I use to pay off loans completely.


<Today’s Date>

Re: <Account Number/Loan Number>

To Whom It May Concern:

Please apply the enclosed check for $<amount> to the account referenced above (my account.) Per <reference source of information (phone conversation, website, whatever)>, I have enclosed $<amount>, which should be sufficient to pay off the loan.

If the amount above is insufficient, please contact me at <phone number>.

If the amount above is sufficient to pay off the loan, please send a letter verifying that the loan is satisfied and that I no longer owe you money.  Also, please cease all autodrafts to my bank account.  If you have any questions or concerns, please contact me at <my phone number>.

Thank you,

<My Name>


I make a copy of the letter I send, as well as the check I enclose for either letter.  I also enclose a page from the student loan website showing the payoff amount for the final letter.*

No matter what, find a way to record proof that they’ve released you from you obligation.**  I always request a letter, but I don’t always get it.  The most reliable method I’ve found for getting written proof of a loan payoff is a little unconventional.

I go to the loan website and request a chat online with a customer service rep.  I then ask the rep to look up and verify that the account is paid off.  After the rep verifies that the account is paid off, I log off and print the chat log.  now I have written proof from the loan servicer that the account is paid off.  I keep this, along with all loan related documents forever.***

*Sallie mae will give you a ten day payoff amount if you call and ask for it.  Just make sure they get your payment within ten days.  I would send the final payment to them by certified mail, receipt requested, just to be on the safe side.  You do not need all the grief they can cause you.

**You think you’ve experienced hassles before?  Try getting collection calls for debts not owed – especially student loan debts.

***There is no statute of limitation for stupid debt collector screw-ups.  It’s darn handy, having proof of a paid off loan, when someone calls you about it years later.  Don’t think it will happen?  Why take that chance?

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