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A little surfing on the Sallie Mae site yielded the following:

-What if I want to send larger payments to pay down my principal balance?
We advance the due date of your next payment if the extra amount received is equal to or more than one monthly payment. However, the payment is still applied to the accrued interest due on the loan and the remaining amount is applied to the principal balance. Payments cannot be applied to future interest because interest accrues under the simple daily interest formula (see How does my interest accrue?). If your student loan is paid ahead, and you choose to continue to make monthly or periodic payments on the loan, you may need to contact us to request a new coupon book.

-Why is my current principal balance different from my 10-day payoff figure?
Your current principal balance does not include the accrued interest currently due on the loan. When paying your loan balance in full, you need to satisfy the accrued interest. The payoff figure includes all accrued interest currently due on the loan plus 10 days of future interest (to allow for mailing time). If the payoff is not received within the 10 day period, you may need to send an additional payment.

-How does my interest accrue?
Interest accrues on the unpaid principal balance during the periods between the dates we have received payments. If the accrued interest is not paid, the excess interest remains due on your loan(s). Interest accrues using the simple daily interest formula:

(Unpaid Principal x Interest Rate) / 365.25 = Daily Interest

Daily Interest x Number of Days = Interest Due

For example: The unpaid principal was $3,000.00 after a payment was received on June 1, 1996. The payment satisfied all the accrued interest that was due on the loan as of June 1. The next payment was received on June 30, 1996 for $100.00. The interest rate on the loan is 8.25%. The formula would read as follows:

($3,000.00 x 8.25% [.0825]) / 365.25 = .68

.68 x 29 = $19.72

In this scenario, of the $100.00 payment, $19.72 would be applied to accrued interest and the remaining $80.28 would be applied to the principal balance, leaving the unpaid principal at $2,919.72. As a result, as you lower your principal balance you decrease the amount of each payment that is applied to accrued interest.

Although this formula may not completely conform to the FOOLS' calculator, this debt appears to be benefitted be paying down the principal or paying it off entirely.

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