We report on our study of optical losses due to sub-band-gap absorption in AlGaAs-on-Insulator photonic nano-waveguides. Via numerical simulations and optical pump-probe measurements, we find that there is significant free carrier capture and release by defect states. Our measurements of the absorption of these defects point to the prevalence of the well-studied EL2 defect, which forms near oxidized (Al)GaAs surfaces. We couple our experimental data with numerical and analytical models to extract important parameters related to surface states, namely the coefficients of absorption, surface trap density and free carrier lifetime.