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Is It Illegal for AES to Consolidate All My Loans?

Written by Steve Rhode


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.

READ  My Private Student Loan Was Put in Deferment Without My Permission

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.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.


  • Hi Steve, actually AES reported me as “current” on my credit report for the 2 private loans up until I reminded them that what they were doing (consolidating federal with private loans) was against the law. 1 month after I brought this snafu to AES’s attention, instead of correcting it, AES placed the 2 private loans into default & cut the regular billing amount that I had been paying since the consolidation, to practically half. When I called, AES & asked what happened, they said the 2 private loans were now in default. This was like overnight! I was being punished for doing the right thing. I asked what if I kept paying my original higher amount to the account, AES informed me the money would not go to the private loans because they were now in default, the money would only go to the federal loans. On my credit report under “Adverse Accounts” the 2 private loans are listed. Under “Account Status” for these 2 private loans it reads: “Claim filed with government”. AES is still treating the 2 private loans as federal loans. Now, I am being sued for breach of contract & my credit has been ruined for the past 7 years.

    • So whatever happened with AES reporting the federal and private loans as consolidated in one loan is something inside AES since it is impossible to consolidate private loans into a federal consolidation. There is just no process to do that.

      It still sounds as if only the federal loans were consolidated but you can confirm that by logging on to your account at

      I stand by my original suggestion that you should find a local consumer attorney who is licensed in your state to help unwind this mess.

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