At the beginning of each semester or quarter, various organizations provide your financial aid funding to your school. These funds are credited to your student account in order to cover your cost of attendance. This process is known as disbursement. The process of disbursement varies depending on the type of your loan: whether it is a federal or private loan.
Federal Student Loans
These loans offer borrowers lower interest rates but typically take slightly longer to process. Federal loans are “certified” by your school, meaning that your school signs off on the borrowing amount, and the funds are disbursed directly to your school account. You will generally be contacted and notified that your aid has been disbursed to your account. Generally, your loan will cover the full academic year and your school will make at least two disbursements to you, usually at the beginning of each semester or quarter, or at the beginning and midpoint of your academic year.
When your school notifies you each time they disburse part of your loan money, they will provide information about how to cancel all or part of your disbursement if you find that you no longer need the money. Make sure that you read and keep all correspondence that you receive concerning your loan.
Entrance Loan Counseling
All first time Stafford Loan borrowers are required by federal regulations to complete entrance loan counseling before their loan funds can be disbursed. This is done online, and serves to ensure that students understand the terms of their loans and their responsibility to repay.
Private Loans
Direct-to-consumer private loans are not certified by the school; in fact, schools don’t interact with these types of loans at all. Your school will simply supply enrollment verification to the lander, and the loan proceeds will be disbursed directly to you. These loans generally carry higher interest rates, but they allow families access to funds very quickly—sometimes in a matter of days.
Using the Loan
You may use the loan money that you receive only to pay for your education expenses at the school that is giving you the loan. Education expenses refers to school charges such as tuition, room and board, and fees, as well as indirect expenses such as books, supplies, equipment, dependent child care expenses, transportation, and rental or purchase of a personal computer.
Staying on Top of the Disbursement Process
It is your responsibility to complete all or your financial aid forms accurately and on time. After that, it is the responsibility of the organizations providing your funding to disburse the money. After this, your school must let you know when your aid is disbursed and the amounts they received.
However, sometimes this process doesn’t go as planned, and there can be serious consequences if your funds are not disbursed correctly. Here’s how you can stay on top of the disbursement process.
Double-check your aid information with your school’s financial aid office before the semester begins. The office should be aware of all your education funding details before you arrive on campus, but it never hurts to double-check.
Before you do this, identify the sources of all your loans, scholarships, and grants, and calculate exactly how much money you will receive from each source for the upcoming semester. You can review your Master Promissory Note (MPN) as part of this process. Your MPN contains all the information about your student loans that you’ll want to confirm with your school. Let your financial aid office know if there are any differences between your information and theirs. They will help you get back on track in time for the disbursement process.
Remember to contact your loan servicer for the most up-to-date information about your loan.
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