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A relative of mine has some high student loan debt. I've decide to help pay down some of it. I called AES and told them that I want to apply the payment to the highest interest loan and for principal reduction only. They told me they cannot apply it only to principal.

According to the answer of this question, it's common for federal loans to not allow paying down principal. I'm unsure whether her student loans are federal or not. (How would I check that?)

However, searching the web, I see this bank website claiming that you should apply any additional payments to principal first. Are they only talking about student loans that are not federal loans? Or is it possible to pay down principal only on a federal loan?

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    If yuo drill further down at AES, (aessuccess.org/manage/repaying_your_loan/…), it says: Payment on Current Account: If you pay more than the amount due, your account may reflect in a paid ahead or partially paid ahead status. Unless instructed otherwise, we will apply the payments as follows. 1. Accrued interest - The amount of interest that accrued every day between the date of the last payment and the new payment is satisfied first. 2. Current principal balance - The remainder then applies toward your current principal balance. -So you should be good?
    – Aganju
    Dec 28, 2015 at 19:11
  • Thanks for that! I think I misread it the first time I read through it, thinking that it would be applied towards all the interest left, not just the interest for the current period. It sounds like it will probably be OK, then. If you write this up as an answer, I'll accept it.
    – user1118321
    Dec 28, 2015 at 19:43

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If the loan is current, it will only apply to the interest accumulated since the last payment.

If you drill further down at the AES website (aessuccess.org/manage/repaying_your_loan/…), it says:

Payment on Current Account: If you pay more than the amount due, your account may reflect in a paid ahead or partially paid ahead status. Unless instructed otherwise, we will apply the payments as follows:

  • Accrued interest - The amount of interest that accrued every day between the date of the last payment and the new payment is satisfied first.
  • Current principal balance - The remainder then applies toward your current principal balance.
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That means current principal not outstanding principal. This company writes on my statement every month that I would have to opt out or the overpayment will be set aside and used for future interest, saving you nothing. Paying ahead just gives aes the use of your money for 30 days until you have accrued interest for them to apply it to. I called the company and was told the money overpayment goes straight to principal a flat out lie which I have recorded. Next they give a fax number for a written request only the fax number fails every time you try to send something. So I go back to the website, also a suggestion on my bill. All you find is a section for payment options but no options , you just get sent in a loop.

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