Is there any legal reason why a collections agency would not change the balance on my credit report?

it's against the law, FDCPA, to misrepresent the amount of money owed.

http://definitions.uslegal.com/c/collections-fair-...

and, i found this excerpt from this website: http://www.cccsintl.org/susan/cd.htm

"When dealing with a collection agency, they will probably not want to accept monthly payments but instead demand that you pay the balance in full. They might even demand that you send them post dated checks paying the balance in full. You do not have to comply with either one of these demands. You can make payment on this student loan and please do not send them post dated checks.

My suggestion is to send the collection agency payments on your student loan. Don't bother to enclose a letter explaining your plan. The collection agency doesn't care about your plan. They only care about your sending them money. Continue to send the collection agency monthly installments. If they continue to contact you demanding more money, write them a letter demanding that they stop contacting you. The Federal Fair Debt Collection Practices Act states you can stop a collector from contacting you by writing a letter to the collection agency telling them to stop. Once the agency receives your letter, they may not contact you again except to say they intend to take some specific action. Good luck on your dealings with this situation."

also, you may have more options available for a defaulted school loan through the U.S. Department of Education's (Department) Default Resolution Group:

http://www.ed.gov/offices/OSFAP/DCS/index.html

you wasn't supposed to pay until they gave you a pay to update and delete letter once the balance was paid in full,that way if they didn't you'd have proof they agreed to and could send a copy of the letter to the credit bureau.now can say you didn't pay and sell to another collection agency.

collection agencies are the scum of the earth!