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Student loans have become essential for millions of Americans to pursue their chosen professions. A higher education is fast becoming necessary for the majority of white collar office jobs. In addition, the demand for health care professionals has driven up enrollment rates in medical schools, nursing schools, and various vocational training institutions. The price of a higher education has risen in response to this demand. AES is the country’s largest student loan servicer. They oversee 8.41 million AES student loans worth approximately $318.7 billion.
Borrowers spend years, and often decades, paying off student loans. Though the gain in salary that results from a degree usually more than covers the loan payments, the long-term commitment of student loans has become difficult for millions of Americans. Part of the problem is the uncertainty of job tenures. Few employers hire with the intention of retaining employees through retirement. If this were the case, far fewer student borrowers would have difficulty keeping up with their loans. The government has responded by expanding programs that modify student loan payments.
Servicers like AES work with student borrowers to make payments affordable for student loan customers. In fact, the federal government mandates that the AES student loans, along with other servicers’ loans, be modified to match federal guidelines. As a result, many more borrowers have regular contact with their student loan servicers. AES also services private student loans. Private student loan borrowers are excluded from federal modification programs, but AES works with private student loan borrowers on payment plans.
With student loan servicers playing a more active role in student debt management, many borrowers are interested in comparing the quality of different servicers. In this article, we compare AES student loans to three of their major counterparts: MOHELA, Nelnet, and OSLA. Besides customer service quality, we compare repayment options, rates, terms, forbearance, and loan forgiveness servicing. With student loans playing such a pivotal role in so many people’s lives, receiving excellent customer service has never been more important.
What Are AES Student Loans?
American Education Services, also known as AES, ranks as the largest student loan servicer in America. It was established in 1963 under the Pennsylvania Higher Education Assistance Act. Originally, the law mandated it to help service loans under the Federal Family Education Loan Program (FFEL). However, FFEL ended in 2010. AES now provides servicing for both FFEL loans issued before 2010 and loans issued under other student loan programs.
Like other student loan servicers, AES student loans are not originated by them. Instead, AES acquires loans from the Federal Department of Education and private student loan providers. The Department of Education disperses blocks of student loans to a variety of servicers. This usually occurs shortly after students graduate. As a result, federal student loan borrowers are assigned a loan servicer. Private student loan borrowers, on the other hand, can refinance their loans with a chosen lender.
AES states its mission is administering the Pennsylvania State Grant and reducing the burden of student loans. The company services loans from borrowers across the country. It works to reduce the burden of student loans by performing key administrative duties and offering convenient payment options. To make the process easy and convenient, payments for AES student loans can be made through various methods, such as by phone, a mobile app, online, or by direct debit. Direct debit customers get a 0.25 percent interest rate discount. With mobile app payment, payments are credited to AES student loans the same day whereas other methods take several days.
On the administrative side, AES helps customers manage due dates. It also administers federal loan modification programs, processes requests for loan discharges based on disability and other factors, and issues forbearances and deferments. It also provides debt counseling and education.
Types of Loan Products
AES student loans consist of both federal and private student loans. It is important to understand that private student loans are ineligible for loan modifications under the federal programs. Many student loan borrowers are tempted to refinance federal student loans with private lenders. This can spell danger for borrowers with high federal student loan balances. If a shift in the economy or a personal crisis caused a drop or total loss in one’s income, the federal modification programs prevent the borrower from going into default.
When a default is reflected on a credit report, the borrower’s score falls into the poor category which blocks access to certain types of financing and forces the borrower to pay higher rates. Default also results in litigation that leads to legal fees and eventual wage garnishments. The federal modification programs prevent student borrowers from falling into this hole. Private student loan borrowers have no such protection. Because student loans are non-dischargeable in bankruptcy, litigation and wage garnishment are likely outcomes in private student loan defaults.
Federal student borrowers can choose between standard, graduated, and income-sensitive repayment plans. Standard plans require repayment over 10 years but are eligible for extension up to 25 years. Graduated plans start with low payments and rise over the loan term. These loans are good for people with steadily rising incomes. Income-sensitive plans base payment on income and the amount of student loan debt. The income-based repayment plan keeps borrowers out of default by basing payments on income with no payment required for incomes under $17,000 per year.
Private student loan borrowers in default should contact their loan servicer. AES works with private student loan borrowers to get payments back on track.
Rates and Fees
Private student loan lenders compete by offering lower interest rates and incentives. As a result, private student loans currently have lower interest rates than federal student loans. However, as a servicer, AES student loans are acquired from other lenders. Therefore, AES has no role in setting interest rates or fees. Likewise, the Department of Education sets student loan rates for federal loans. After graduation, students consolidate all of their federal student loans and receive an interest rate based on the market interest rates when they consolidated.
How It Compares
We picked a few similar products available on the market to see how they compare.
- MOHELA
- NELNET
- OSLA
American Education Services
Fees: $
Fees are determined by the originating lenders.
Repayment Options: 2 out of 5 Stars
AES student loans offer loan modifications and payment date adjustments for federal borrowers. These programs are unavailable to private student loan borrowers.
Rates and Terms: 5 out of 5 Stars
Private student loans can have fixed or variable rates while federal loan rates are fixed.
Customer Service Quality: 5 out of 5 Stars
AES provides prompt and helpful customer service. It also provides students with financial education.
Forbearance and Forgiveness: 5 out of 5 Stars
Federal loan borrowers are eligible for forbearance due to of loss of income and forgiveness based on disability or public service.
Pros
- Largest servicer
- Excellent customer service
- Debt education programs
Cons
- Borrowers cannot choose to have AES student loans
- Private student loans are ineligible for federal modification programs
- Some reviewers complain about false credit reporting
For more information:
MOHELA
MOHELA services private and federal student loans. As a servicer, it acquires loans from private lenders and the Department of Education. This St. Louis, Missouri based lender states on its website that it is committed to providing a first-rate customer experience. It also pledges to aid borrowers in repayment and provide customized solutions.
Fees: $
As a student loan servicer, MOHELA has no control over fees.
Repayment Options: 2 out of 5 Stars
MOHELA goes the distance in offering repayment options for federal student loans. However, private student loan borrowers have few options if they cannot pay, so defaults on private loans can leave borrowers in dire straits.
Rates and Terms: 5 out of 5 Stars
MOHELA does not set rates or terms.
Customer Service Quality: 5 out of 5 Stars
MOHELA pledges to provide well-trained customer service staff and personalized service. Online customer reviews generally show the company does an outstanding job; however, there are some complaints of lack of knowledge of federal program guidelines amongst some employees. The company provides account management tools that make budgeting for student loans easier. It also provides debt education and helps borrowers avoid student loan scams.
Forbearance and Forgiveness: 5 out of 5 Stars
MOHELA works hard to help student borrowers who are struggling with loan payments.
Pros
- Federal loan programs offer flexible payment terms
- Educational programs
- Skilled customer service
Cons
- Private loans offer little payment flexibility
- Student loans take years or decades to pay off
- Income-based repayment often increases debt load
For more information:
NELNET
NELNET services private student loans and federal loans. Its customer service team works hard to educate borrowers about their different loan options. For federal loans, NELNET administers federal income-based repayment plans and loan forgiveness plans. Federal loans can be forgiven when borrowers engage in public service or suffer a total disability. Private student loans are ineligible for income-based repayment or forgiveness.
Fees: $
NELNET has no control over fees.
Repayment Options: 2 out of 5 Stars
NELNET provides many repayment options under federal guidelines for federal loans. Private student loan borrowers, however, are ineligible for these.
Rates and Terms: 5 out of 5 Stars
NELNET, as a loan servicer, has no control over rates or terms.
Customer Service Quality: 4 out of 5 Stars
NELNET provides customer service to all borrowers through its call center and online. Customers receive debt counseling and education as well.
Forbearance and Forgiveness: 5 out of 5 Stars
NELNET administers forbearance and forgiveness programs that help student borrowers afford their loans. Forgiveness of loans occurs in the case of public service or disability.
Pros
- Flexible repayment plans for federal loans
- Knowledgeable customer service
- Debt education programs
Cons
- No flexible repayment plans for private loans
- Borrowers cannot choose NELNET
For more information:
OSLA
OSLA Student Loan Servicing has been administering student loans for over 40 years. It has $1.6 billion in assets and services 130,000 student borrowers. OSLA Student Loan Servicing was created by the State of Oklahoma and bases its operations in Oklahoma City. The company pledges to provide exceptional customer service, giving its customers accurate information and courteous assistance.
Fees: $
As a student loan servicer, OSLA has no control over fees.
Repayment Options: 5 out of 5 Stars
OSLA Student Loan Servicing provides flexible repayment plans through government loan modification programs. It does not service private student loans.
Rates and Terms: 5 out of 5 Stars
As a student loan servicer, OSLA has no control over rates or terms.
Customer Service Quality: 5 out of 5 Stars
OSLA Student Loan Servicing provides high-quality customer service. Its customer service team helps customers navigate the federal student loan bureaucracy and qualify for loan programs that make student loan payments affordable.
Forbearance and Forgiveness: 5 out of 5 Stars
Student borrowers who suffer from financial distress can apply for a forbearance. Forgiveness is available in cases of disability or public service. OSLA representatives can assist customers in applying for debt relief.
Pros
- Forbearance programs available for periods of unemployment
- Debt education programs
- Professional customer service representatives
Cons
- Borrowers cannot choose OSLA
- OSLA services a relatively small number of student loans
For more information:
Conclusion
Student loans play an increasingly important role in many people’s lives. With the majority of students who attend institutions of higher learning needing financial aid, student loans are fast becoming the path to a well-paying career for most people. AES works hard to fulfill its role as the largest student loan servicer. As a servicer, it acquires loans from the Department of Education and private student loan lenders. In recent years, AES has had to take an increasing role in administering loan modifications for their AES student loans.
Student loan defaults have hit all-time highs. The job market has been unable to support the number of graduates. In some cases, there are too many graduates with a certain degree. Also, technology has caused a rapid shift in the demand for workers with certain skills. Additionally, the nature of many jobs has become short term, making it difficult for many students to pay down their student loan debt. These factors have stressed many student loan borrowers and have caused unprecedented defaults.
AES works hard to keep its customers out of default on their AES student loans. It provides knowledgeable customer service staff members who can assist borrowers in qualifying for federal loan modification programs. The income-based repayment plan and other modification programs have saved millions of borrowers from default. AES also services private student loans, but private student loans are ineligible for modifications. Because of this, many private student loan clients end up in default. Overall, AES earns 4 stars. It does a good job with federal loans but cannot provide much assistance to private student loan borrowers.
