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How are Student Loans Distributed?

Loans are how many college students can afford their education, but very few know how government agencies or universities distribute them. However, it is vital to understand the distribution process to ensure you pay tuition, room and board, or rent on time. Remember, how you receive funds depends on what kind of loan you have. Federal and private loans are different, and not knowing the difference may cause problems down the road.

No matter what type of student loan you have, it is vital that you pay it on time. If not, you risk ruining your credit score, which can negatively affect when you want to open a credit card, start a car loan, or buy a house. When you find yourself falling behind or struggling to make ends meet because of your student loans, contact McCarthy Law.

Distribution of Federal and Private Student Loans

Colleges and universities receive student loans, and their financial aid offices distribute them to students. This typically happens at the start of each semester, quarter, or trimester, depending on the school’s academic calendar. Aid will typically first cover tuition and fees. Some other loans may cover room and board or institutional fees.

If there is any money left over, the school will refund the student. Typically, students can use this money for whatever they want, but they should put it toward books and living expenses. Schools may refund the remainder of the loan as a check or a direct transfer to your bank account. You might also be able to request the university keep the money for future payments or return it to the government or private lender.

How Are Federal and Private Loan Distributions Different?

There are a few small but significant differences between federal and private student loans. Knowing how each process works can help you anticipate any issues with your loan distribution.

Federal Loan Distributions

Federal student loans come from the United States government, and students apply for them through the FAFSA. After you receive a letter informing you of the scholarship, you must fill out additional forms informing the government if you want to accept or decline.

Before you begin school, your university will confirm the loan amount, distribution date, and where they will send it. Reach out to your school’s financial aid office if you do not receive a notification, letter, or email.

New borrowers taking out Direct PLUS Loans for the first time must complete online entrance counseling before receiving the funds. In the class, students learn about managing expenses and loan terms. Facilitators also emphasize the importance of minimizing debt.

Private Loan Distributions

Once you find a private lender who offers you a loan, carefully read over the terms and conditions, and accept or reject the offer. After this, your school will have to certify it before distributing the loan. School certification is when the lender confirms enrollment status and the amount with the university. Certification may take up to 10 days, but it might take longer depending on the school.

Common Issues with Loan Disbursements

Unfortunately, most of the common issues with loan disbursement come from students. Here are a few things to remember, so your financial aid arrives on time.

  • Write deadlines down when applying for private loans or FAFSA.
  • Do not forget to complete the loan agreement.
  • Review the application thoroughly before submitting it.
  • Make sure to attend required loan counseling sessions.
  • Enroll in enough credits to maintain loan eligibility.

If you still have questions about a loan, do not hesitate to contact your university’s financial aid office. They have the resources to help you navigate the complexities of federal and private loans.

Contact the McCarthy Law Firm Today!

While student loans are a great way to make college more affordable, you might have trouble paying them back. Private loans especially have higher interest rates than federal loans. Through the student loan debt settlement program at McCarthy Law, one of our attorneys will begin the negotiation process to reduce the interest and how much the lender claims you owe. Our program is through privately issued loans only. To learn more about our services or learn which type of loans you have, call (855) 976-5777 or complete our contact form to schedule a free consultation.

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Joe Panvini

Joe received his law degree from the Sandra Day O’Connor College of Law at Arizona State University in 2010. On behalf of consumers, he has successfully briefed and argued complex consumer law issues in both individual and class action lawsuits. Joe is admitted to practice in Arizona and Washington, as well as numerous federal courts across the country, including the Ninth and Eleventh Circuit Courts of Appeals.