Hopefully the answer to this is general enough to be answerable out of the context of my specific loan/loan provider.
I have a student loan through the U.S. DOE, it is comprises 10 loan tokens of various amounts (equaling ~$30,000), interests (3%-6%), and about half subsidized/half unsubsidized.
My minimum payments are $325 a month, per my loan agreement my interest gets paid first let's take last months example of $96 leaving me $229 for principal. Here's where I get confused. That $229 is being split evenly across all of my 10 loans paying roughly 8% of the principal on each. This is leading to some of my high interest/low balance loans getting $7 off their principal while lower interest loans get much more. Surely, I figure, I would be able to pay off my loans much quicker and with less total interest accrued if all of the remaining $229 was put toward the highest interest first.
I emailed my provider asking them why it was this way and if it could be changed and they very shortly stated it isn't possible because:
The regular monthly payment goes first to accrued interest, and then is prorated over the loans within the account. This is necessary in order for your student loans to be paid off in the allotted time, as indicated in your master promissory note.
Italic emphasis theirs on "prorated"
Looking in my promissory note the most related thing I can find is:
Standard Repayment Plan
Under the Standard Repayment Plan, you will make fixed monthly payments and repay your loan in full within 10 years (not including periods of deferment or forbearance) from the date the loan entered repayment. Your payments must be at least $50 a month ($600 a year) and will be more, if necessary, to repay the loan within the required time period.
Which makes sense and with my plan it seems I would meet that 10 year mark faster.
So I ask you:
Why are they insisting my payment must be split this way, is it truly beneficial to me, would I not meet my 10 year mark if done my way? Or is it just the standard way to pay that I signed a contract to. What does the emphasized "prorated" remark have to do with it?
EDIT: note about current payment plan:
I'm currently only making the minimum monthly payment. Also it is stated by them that any additional subsequent payments during the same billing cycle can be applied however I like.