Nelnet won't allow principal-only payments until all interest is settled. Your overpayment will be applied towards the interest for the next month. The old structure of school loans used to allow principal-only payments.
The only way around this is to figure which of your Nelnet loans/groups have most of the interest paid up, so that you can start paying that principal.
@Snook_on_the_Line wrote:So I've got a $7800 federal loan that is transferring to nelnet
my question is if I set up payments from my bank account and overpay, will the amount in excess of my standard payment automatically be applied to the principal?
or will it be credited towards next months payment?
when I had my nelnet loans, I thought there was a checkbox for that option, but I never used/tried it
https://nelnet.studentaid.gov/content/howpaymentsareallocated
this should help clarify, but I think it aligns with what ^^ said above
"Your overpayment will be applied towards the interest for the next month."
Not true at all. I over pay my loan every month and the excess is applied to the principal not towards interest that might accrue between that payment and the next month's payment. It is actually illegal for them to apply the excess monies to interest that has not accrued yet. It is also why I make my payment about 10 days early so that more money goes to principal than interest.
Nelnet has a box to check on how you want excess monies applied. You can spread it out evenly amongst all your loans or apply it to one or more in particular. I paid off two of mine faster that way.
"or will it be credited towards next months payment?"
In "theory" it is credited towards next month's payment only in that if your monthly payment is $300 and you over pay by $50 they reduce the amount your next payment is. If you keep paying the standard amount and a bit extra (which is what I do) then you reduce the principal faster. Plus, I view it as a safety net that my next payment might be $75-100 lower all the time in case something else financial needs more attention that month.