So one of dear bf's federal student loans is being paid through West Asset Management. Apparently his deferment lapsed and they never contacted us until 6 months after (even though we had provided updated addresses, that's a different rant).  When we found out, he set up a monthly automatic payment from our checking account to draw on the 15th.  Every month on the 17th we receive a letter from West Asset Management that we missed our payment and that the account is defaulting back to the federal government for tax liens, then the payment comes out on the 19th.  After several calls to West Asset (and being given bogus extension numbers for the "case director") someone finally told us that yes, the payment is set-up to draw on the 15th so its considered on time. Because of their banking system, it doesn't actually clear until the 19th, so we receive an automated notice about it being in default. When we asked what we could do to correct it we were advised that's just the way it works. On top of this, the first time they took down our routing number wrong and never notified us.  When he called because the payment hadn't cleared they apologized and set-up a double payment for the next day.  When he asked if we could just start the regular payments then since it wasn't our error the answer was "Sorry, that's the way it is.  We double-up the payment or it gets referred back to the government for tax liens." What a crock.

What the tax lean is they will just take your federal refund until it is paid, so really it is not as bad as it sounds.  

Yep, I know. That is as bad as it sounds to us! I'd rather pay the $105 a month, than not have a tax refund for 10+ years .

Its a moot point anyway, they're not actually reporting it back to the Federal Government.  They're taking our money out every month, but their system is so screwed up that it has us down as late when we're on an automatic payment plan set-up through their company.  We're getting notices for no reason, aside from deforestation, apparently. Glad we recycle.

Have you considered refinancing to get to another lender?  Depending on the current terms, it shouldn't be any more expensive; most consolidation loans are an average of your current rates - and just because their system is screwed up, your BF shouldn't have to risk his credit getting messed up if they report it to the credit bureaus the way they're reporting it to you.

Also, many of the student loan lenders give you a discount for electronic withdrawal (mine gives me 1/4% off) and a further discount for on-time payment (1/2% after 1 year, 1% after 3 years) - it's a gimme since the auto-draft is never late.  I'd really suggest checking around for a better lender; even if he gets the same terms he's got now, there are usually no fees, and there'd be less headache.

Because its a federal student loan and came out of deferment and into default, we have to have a year's worth of payments with West Asset before the government will allow it to be refinanced, unfortunately.