Consumer complaint received 2015-12-14
Product: Student loan — Non-federal student loan
Issue: Dealing with my lender or servicer — Trouble with how payments are handled
Company: AES/PHEAA

Complaint:
Re : American Educational Services ( AES ) XXXX XXXX XXXX XXXX XXXX, PA XXXX School : XXXX University XXXX, Texas I am the co-signer ( father ) of a student who took out XXXX XXXX educational loans from XXXX. Recently, XXXX 2015, XXXX contracted with American Educational Services ( AES -- a XXXX. ) to service the loans. From the beginning AES has not, in my opinion, correctly applied loan payments paid monthly to amortize the loans when such payment ( s ) includes extra funds above the required payment amount. I have contacted XXXX directly and provided copies of such correspondence from XXXX to me to AES that funds above the required amortizing amount should be applied to the principal balance. It is my opinion and position as follows : 1. 
Extra funds exceeding the required amortizing payment amount due received BEFORE the then regularly schedule monthly due date shall be applied to principal only. [ XXXX via correspondence agrees with this and AES has received numerous directives in writing and on the checks in payment themselves of these handling instructions and seemingly refuses to comply. ] 2. 
Interest may accrue daily under installment notes but interest, assuming the note ( s ) are current, is NOT DUE nor collectable until a regularly scheduled due date arrives. 
3. 
To take some portion ( or all ) of extra funds paid and calling it interest when the notes are current is in essence collecting some portion of the NEXT due amount BEFORE the due date. This has the effect of creating and charging a higher interest rate than either agreed upon or allowed by the redetermination process included in the note. 
It is unknown and AES will not show how they are calculating allocation of extra funds to interest or to principal. AES seems to rationalize their practice, which is in my opinion both outside the terms of the note and fraudulent, of parsing extra funds above the due amount in some fashion between principal and interest by maintaining that interest is always due at all times irrespective of any amortization schedule with scheduled payments and due dates. If one follows AES 's logic it could be very difficult for a borrower to either reduce the principal balance beyond what might be happening driven by amortization or accelerate the term of the note until such time AS ALL INTEREST UNDER THE FULL TERM OF THE LOAN HAS BEEN PAID. This is ludicrous and has the effect of making it meaningless for borrower to either try and accelerate the note or proactively manage repayment of such debt over time. 

There are additional issues regarding AES and their performance, conduct and business practices. Namely when formerly managed by XXXX it was the XXXX practice that both borrower and co-signer each received a monthly statement and coupon for payment of the next payment. These notes have a quarterly interest rate reset provision ; thus important to stay current on the due amt from changing interest rates. AES has irrationally refused to continue this prior practice that allowed borrower and co-signer to each insure, through co-ordination, that payment was made timely. When questioned AES maintains that XXXX denied this request. This seems quite odd in view of the fact for all the years prior to AES entering the picture that this had been the usual practice by XXXX. 
I have written XXXX lengthy letters to AES over 6 months ( registered delivery ) trying to resolve these issues to no avail. The most important of these being what I feel and believe to be the incorrect and fraudulent application of payments. If I am correct and the misapplication is only $ XXXX/month for these XXXX contracts with the XXXX of borrowers with student loans there could be vast sums potentially being misappropriated! Perhaps the offices of the CFPB can facilitate resolution.

Company response to consumer: Closed with explanation