Many Americans pay extra on their student loan payments every month, so their loans can be paid off more quickly. What they may not realize is that the extra money they are paying is not being applied to the principal. This means many borrowers have been making smaller principal payments over a longer period of time and end up paying more in interest.

How does this happen? The student loan servicer (the company that collects the payments) applies the extra payment towards future payments instead of paying down the principal. Afterwards, they lower the amount due the next month and extend the borrower’s repayment period.

This has become common according to the Consumer Financial Protection Bureau (CFPB). A practice known as re-disclosure of repayment terms allows servicers to reset loan repayment schedules which causes borrowers’ monthly payment schedules to rise and fall.

This can happen when loans are transferred from one servicer to another and can also be triggered by a company making changes to its computer systems.  According to the CFPB, more than 10 million student loan borrowers have had their accounts moved from one company to another since 2013.

This is not the first offense either.  Other student loan servicers have been flagged by the CFPB.

In August, the CFPB ordered Wells Fargo Bank to pay $4 million for illegal private student loan servicing practices. The CFPB outlined how Wells Fargo increased costs, withheld critical information from borrowers that would have allowed them to effectively manage their student loans, and failed to update inaccurate credit report information. Wells Fargo was required to pay  $410,000 to all customers affected by illegal charges from 2010-2013 and pay a $3.6 million penalty to the CFPB.

Want to Cut Your Tuition Costs? Negotiate.

“Wells Fargo hit borrowers with illegal fees and deprived others of critical information needed to effectively manage their student loan accounts,” said CFPB Director Richard Cordray. “Consumers should be able to rely on their servicer to process and credit payments correctly and to provide accurate and timely information and we will continue our work to improve the student loan servicing market.”

So how can borrowers protect themselves each month and get out of debt more quickly? In this blog post, CFPB Student Loans Onbudsman Seth Fortman encourages borrowers to watch out for surprise re-disclosures by tracking their monthly statements. Borrowers who regularly pay extra through automatic payments can contact their servicer and tell them how they want the money applied. By paying extra every month on the highest interest rate loans, borrowers will pay less interest and pay off their loans faster.

This past summer, the Department of Education (ED) announced new standards for the servicing of federal student loans to ensure that the 43 million American with student loan debt receive fair treatment as they repay their loans. These standards will require servicers to provide accurate information about account features and loan terms, timely and consistent communication, accountability in response to complaints, and transparent resolution when problems occur.

Fortman states that the CFPB will continue to work with other government agencies on these new standards for the servicing of federal student loans. “We’re continuing our work with student loan servicers, federal and state agencies, and other stakeholders to strengthen student loan servicing practices. The Bureau has also prioritized addressing illegal student loan servicing practices when they occur.”