Complaint sub-issue: Trouble with how payments are being handled

This is a long story, so I will try and shorten it as much as I can : I have had my XXXX XXXX student loan for a number of years, and had no issues. My payments were approximately {$90.00} a month, which I had set up on auto pay at {$45.00} every 2 weeks. This in turn actually makes one extra payment a year, so I was paying MORE than I needed to. Then, in XX/XX/XXXX/XX/XX/2018 I receive a letter that states my loan is going into collections. It turns out that all of the payments that I was making through my XXXX  XXXX XXXX bill pay, which were auto payments, were being returned. This is a bill pay account, so I do not check this on a regular basis. I called in when I saw the letter and spoke to a representative. I have never been met with such a rude representative in my life! I explained what was happening and asked why my payments were being returned. The guy said it was an error at my bank. He said that I have not made any payments since XX/XX/2018, which was false! I checked with my bank and it was XXXX XXXX that was returning the payments. He then said, we've sent you letters. I'm sorry - I do not open bills when I know they are setup for auto pay. I have no need. I take blame for THAT part at least. So he then starts asking me if I can pay the loan off. It has a collection balance of {$1300.00} and said I would never get the offer again to settle the loan. Of course I could not pay it then. He then says to me, well if the money was returned you should have it to give to me, unless you spent it all, so I will need that payment today. I refused. He pressed and pressed the issue when I finally said, Well, first of all, I have a mortgage to pay, so I apologize, I am not going to be able to stroke you a {$1300.00} check. He says, well I will be sure and let my people know that your mortgage is more important than us. Yes, you do that, because it is! He continued to be the most rude and nasty and antagonistic person that I have ever had to speak with in any customer service situation. When I finally hung up, I started having severe anxiety and panic attacks and had done so for days after. I called back a month or so later and spoke with someone different in hopes to get some resolution. It was the same thing. They have the loan charged off and she offered a settlement of {$1300.00}. She said they could not reinstate my loan so that I can continue to make payments on it. I explained how I had made all of the payments and it was SM that was returning them. This representative then said that sometimes on bill pay, if the money isn't in the bank, it will be returned by the company. What?!?! I had to explain to this brainiac that if the money isn't in the bank account, it will not even be withdrawn to be sent to a vendor for payment!! These are the people that are handling accounts!? No wonder!? It's pretty cut and dry : It was withdrawn from my account, sent to XXXX XXXX, not applied by XXXX XXXX, and then returned about a month later to my bank FROM XXXX XXXX!!!! I won't pay the loan if it has been charged off. I will be disputing with the credit bureau, consumer affairs, and letting everyone I know how XXXX XXXX treats people. This was their mistake ... .not mine. I have attached the document that clearly shows where XXXX  XXXX XXXX withdrew the money. XXXX XXXX really needs to get their stuff together! 

Oh, let 's also mention that I did call them in XX/XX/XXXX after the hurricane hit our area to ask about a forbearance simply because XXXX had automatically placed one on my accounts due to the hurricane. XXXX XXXX offered nothing, which was fine, I was just checking to see if they would. But NOTHING was mentioned at that time about me being past due!!!!!