Last updated on February 7th, 2019 at 08:00 pm.
If you have federal student loans, there’s a good chance they are serviced by American Education Services (AES). In fact, there’s a really good chance. Millions of people all over the country have AES student loans.
Some have referred to AES as a “quasi-governmental” agency. They aren’t exactly a federal agency, but the feds approved them to service loans issued through the Federal Family Education Loan (FFEL) program.
AES Student Loans
In 1963, the Pennslyvania General Assembly established the Pennsylvania Higher Education Assistance Agency (PHEAA). Two years later, the Higher Education Act of 1965 established the FFEL. This program provided private student loans to students. Through it, the federal government would guarantee these private student loans.
PHEAA then established AES to be the servicer of FFEL loans. Things quickly get convoluted when discussing AES, however.
That’s because AES services both federal and private student loans. At the same time, AES is under the PHEAA umbrella, which also owns the FedLoan program. PHEAA created FedLoan specifically to service federal loans.
And yet, AES services federal loans as well.
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The End Of FFEL
The FFEL serviced student loans through private lenders since its inception in 1965. That would change in 2010 when FFEL was eliminated. Since then, all the Department of Education has directly funded all federal student loans.
Although the FFEL program is now defunct, there are still millions of borrowers with outstanding loan balances. And AES is the loan servicer for a large percentage of them.
There are other large federal student loan servicers, but AES and FedLoan together are the largest.
Are you confused yet? It can be a lot to process. The mingling of government and quasi-government definitely makes this less than straightforward. For now, we’ll just focus on the loans themselves.
What Is The Purpose Of AES Student Loans?
AES provides student loan servicing. According to the Consumer Finance Protection Bureau, some common things loan servicers do are:
- Send you a bill each month
- Disburse money from the loans
- Track loans while borrowers are in school
- Process payments
- Respond to borrower inquiries and information requests
- Accept applications and process changes in repayment plans, deferments, forbearances, or other activities to prevent default
- Maintain loan records
- Ensure the administration of loans in compliance with federal regulations and other legal requirements
But AES is not the one signing the checks. AES also doesn’t control important things like student loan interest rates, which are set by the federal government.
To see the most up-to-date federal student loan interest rates, visit Federal Student Aid.
Types Of Loans Offered
AES offers several different types of student loans, including:
There are several options here, but most of them are the standard government student loan types. The odd man out would be private loans.
As private loans are obviously not government loans, they will likely have different terms than the rest.
If you have AES student loans that a private lender services, you will may need to contact that lender directly for help.
AES student loans have most of the standard repayment options:
Direct debit is always a good option. You may disagree, but I like direct debit because it makes things so easy. Payments are withdrawn automatically, everything is online and you never have to write a single check.
Better still is the fact that according to AES, you may qualify for an interest rate deduction if you apply for direct debit.
Online payments are going to be similar to direct debit in the sense that everything is online. The biggest difference is that you pay manually online instead of it being automatic.
One small issue here is that their website is a bit dated. That doesn’t necessarily mean it will make payments more difficult, but something that doesn’t look like a 20-year-old design would refreshing.
Per AES, these payments are processed the same day and will post to your account within two business days.
This is a nice option for those of us who are rarely in front of an actual computer (the horror!).
Maybe mobile payments aren’t your thing. Do you still regularly use VHS tapes? Maybe you go inside the bank to fill out a withdrawal slip for cash?
Hey, whatever the reason may be, I know there are still some old school folks out there. So if that’s your jam, you can always pay your AES student loans by mailing in a check.
In addition, AES allows what they call “targeting payments.” Per the linked page, this means paying more than your minimum payment and then choosing to which student loans you would like to allocate the extra funds.
Loans are complicated, but I am more of a debt avalanche person. As such, if I were making these targeting payments, I would probably attack the ones with the highest interest rates first.
But, of course, you might be more of a debt snowball person. Whatever works.
What If You Can’t Pay?
AES student loans do have options for you if you are struggling to make payments on time. Such options include:
Keep in mind that many of them come with distinct disadvantages.
For example, in most cases, if you receive a deferment or forbearance, interest will continue to accrue. I am especially discouraged by interest on student loans. After all, you receive nothing in exchange for them on a daily basis.
I always like to say that at least with a mortgage, for example, you have the daily benefit of a roof over your head.
Can You Get Lower Interest Rates or Payments?
AES will not be able to help you with interest rates, however. These are set by Federal Student Aid.
In terms of lowering payments, there are several possibilities. For your federal student loans serviced by AES, the standard options are available:
- Standard Repayment
- Income-Based (IBR)
- 25-Year Extended
Let’s talk further about income-sensitive and IBR.
With income-sensitive repayment, your monthly payment is based on your adjusted gross income.
Adjusted gross income (AGI) is a concept that may seems more complicated than it really is. Essentially, AGI is the total amount you made minus any allowable expenses.
For example, contributions to your retirement plan may be deductible. In addition, certain health expenses and other items may apply.
See Investopedia for a more complete list of allowable deductions.
IBR is another option that can help you lower your payments. Per AES, you must have made at least 300 payments on or after July 2009.
In addition, your initial monthly payment should be more than 15% of the difference between your AGI and 150% of the poverty line for your family size.
Let’s break this down with a scenario because that seems a bit complicated.
Say you have a family of four. According to Healthcare.gov, that would put the poverty line at $25,100 for your family. 150% of that is $37,650.
Now let’s say your household income is $30,000.
The difference between these two figures is 37,650-30,000 = $7,650.
In order to qualify in this scenario, your monthly payment would have to be more than 15% of $7,650, which works out to $1,147.50.
AES mentions that this plan is meant for those experiencing fiancial hardship. That seems to be the case based on these numbers.
Refinancing Your AES Student Loans
Refinancing can also be an attractive option because it can mean a lower interest rate, lower payments, and more. For me personally, refinancing was great because my minimum payments were so insanely high.
However, if you’re new to the idea of refinancing, it’s important to note that refinancing must go through a private lender. You cannot simply ask AES to refinance your student loans; they won’t be able to help you.
For my recommendation on student loans, see my post about SoFi refinancing.
Because you’ll have to go through a private lender, you may forego certain consumer protections that come with federal student loans. Thus, it’s important to thoroughly research ahead of time and be sure you aren’t walking into a bad deal.
AES Student Loan Consolidation
Federal Student Aid now processes all federal student loan consolidations.
It’s important to note that if you have private student loans in addition to federal student loans, you won’t be able to consolidate the private loans with the federal loans.
As noted by AES, there are both pros and cons to consolidating. Make sure you are aware of both before making a decision.
Visit Federal Student Aid If you’re interested in applying for consolidation.
Loan Forgiveness And Discharge
AES also offers forgiveness and discharge of your student loans. Only some people will be eligible for these.
Student Loan Forgiveness
In terms of forgiveness, the following are offered:
Teacher Loan Forgiveness
To be eligible for this form of forgiveness, the following is required:
Your loans were disbursed after 10/1/98 AND you teach full-time for 5 consecutive and complete academic years at a Title I school or educational service agency that appears on the Department of Education’s Annual Directory of Designated Low-Income Schools for Teacher Cancellation Benefits.
5 years is a good chunk of time, but this is worth pursuing if teaching is what you planned to do anyway.
Public Service Loan Forgiveness (PSLF)
The idea behind PSLF is fairly straightforward – work in the public sector and you could be eligible for forgiveness. The only other major criterion is that you must make 120 qualifying payments.
Of course, what qualifies as the public sector can sometimes be unclear. If you’re interested in learning more of the specifics, check out the link above on PSLF.
Student Loan Discharge
AES also offers student loan discharge in some instances, such as if your school:
- Falsely certified your ability to benefit from education
- Signed your name without your authorization
- Failed to pay a tuition refund
They also offer total and permanent disability discharge.
What Are People Saying About AES?
I have seen the some raise the concern of numerous complaints about AES. While I don’t doubt the legitimacy of most of these stories, they sound more like anecdotes than common occurrences.
I also came across someone saying their AES student loans were in collection. This is something I never had the misfortune of encountering. And I wouldn’t wish it on anyone. Constantly having someone hounding you for money cannot possibly be a pleasant experience.
To give a more “real” example, I asked a my friend Liz of Rose Colored Water for some input. Her student loans are serviced by AES. Here’s what she had to say:
Overall, AES has always been upfront and communicative with me. I’ve interacted with their customer service and they are prompt and quick to solve problems. Their website is sub-par, and most of my issues have come from interactions with their website. For example, for the last year, my account continues to be “locked out” and I have to call Customer Service to have it unlocked. They don’t know why this happens, but it is irritating and takes up my time and patience. Overall though, they have been a good loan servicing company for me.
Thus, while it would seem that there are definitely issues with AES, they don’t necessarily apply to every aspect of the experience as a customer.
Still, the glaring issues are difficult to ignore.
The Bottom Line
AES certainly has a structure that can be quite confusing. However, they offer many different types of loans which will meet most borrowers’ needs.
If further aid is needed, they can help by providing private loan options as well. They have many different types of repayment plans as well as refinancing and consolidation (for eligible loan types).
Some have expressed concerns with their customer service, and their website could really use a facelift. Still, you are getting student loans with federal government protections, which is a huge plus.
AES student loans are high quality, provided you aren’t one of the unlucky ones.