Is It Illegal for AES to Consolidate All My Loans?


Dear Steve,

After graduation, I consolidated my loans thru AES. I had 7 loans (5 federal & 2 private). AES said it could only consolidate the federal loans, but not the private loans because PLs were not government loans, subsidized & are structured differently.

This explanation made sense to me & I only asked because my college financial aid office advised us to consolidate our student loans. Contrary to what was stated, AES consolidated ALL 7 loans to 1 account number.

AES sends a monthly bill with this 1 account & I pay monthly installments. I called to remind them of their policy of not mixing private & federal loans & asked to see how my payments are being distributed. They said it didn’t matter now that I had been making payments. I said if they were not willing to provide me this information, I wanted the private loans separated from the federal loans, immediately, i.e. removed from the 1 account & assigned to a totally separate account number, so I could pay them separately (which is what AES’s initially said it had to do).

Nothing has happened over 2 years & now they have placed the private loans in default though the federal loans are current while ALL 7 loans are assigned to 1 account number.

My point is that either all 7 loans should be current or all 7 should be in default. Now I have a debt collector asking me when & why did I stop making payments to the account. I have never stopped & continue to make payments. That is why the 5 federal loans are still current.

Is it illegal for a loan servicer to consolidate private loans with federal loans?



Dear Ollie,

Wow, that’s a new one. I have seen both private and federal student loans consolidated into one new private student loan, paying off the federal.

That’s not what it sounds like happened in your situation.

Overall it sounds like your federal loans were consolidated into a new Direct Loan and your private loans were left alone.

Certainly you need much more information here to get to the underlying facts. If you are not willing or able to fight this battle to figure out what happened, I would consider hiring a consumer attorney in your state to help you get to the bottom of things. You can find one here.

The big issue here is if AES is reporting all loans under one number, you are sending one payment, but they are not applying the account across the board.

The one absolute fact I do know is more investigation is needed here for sure. It doesn’t add up.

Steve Rhode
Get Out of Debt GuyTwitter, G+, Facebook

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.