Disbursement

Detailed Explanation

After a student loan is approved, the loan funds must be transferred to the school to cover various costs, such as tuition, fees, room and board, and sometimes additional educational expenses like books and supplies. The disbursement amounts are usually determined by the school's financial aid office and the terms of the loan.

The lender coordinates with the school to arrange the disbursement of funds. This is typically done in installments, beginning with the start of each term or semester, to ensure that funds are available when needed but not before.

Schools often apply the loan funds to the student's account to cover tuition and fees first. If there are any funds remaining, the school may issue a refund to the student, which can be used for other educational expenses. It is important for students to manage these funds wisely, as they are part of the loan that will need to be repaid with interest.

Example

A student receives a student loan to cover the annual tuition at their university. The university's financial aid office schedules two disbursements per academic year, one per semester. At the start of each semester, the loan funds are sent directly to the university, which applies them to the student's tuition and fees. Any leftover amount is refunded to the student for other educational costs.

Key Articles Related To Disbursement

• How Student Loans Work: Applying, Borrowing, And Paying Back
• Why Student Loan Debt Can Be Good
• What Happens If You Don't Pay Your Student Loans

Related Terms

Financial Aid: Monetary assistance provided to students to help cover the costs of their education. Financial aid can include loans, grants, scholarships, or work-study programs.

Tuition: Tuition refers to the amount of money educational institutions charge for enrolling in courses or programs offered by the college or university.

Loan Repayment: Refers to the process of returning borrowed funds to the lender. This is usually done in regular instalments, including interest, over a specified period. 

Student Loan: A loan provided by a government agency or a financial institution for the purpose of helping students cover the cost of post-secondary education. 

FAQs

When do student loan disbursements occur? 

Disbursements typically occur at the beginning of each enrollment period, such as a semester or quarter, as determined by the educational institution's financial aid schedule.

What happens if a student loan disbursement is more than the cost of tuition and fees? 

If the disbursement exceeds the cost of tuition and fees, the excess funds are refunded to the student to be used for other educational expenses.

Can a student control how the disbursement is used? 

The initial use of the disbursement is controlled by the school, which applies it to tuition and fees. Any excess funds refunded to the student can be used at their discretion for educational costs.

What should a student do if they don't receive their loan disbursement? 

Students should first check with their school's financial aid office to understand the disbursement schedule and confirm that all necessary paperwork is completed. If there are no issues on the school's end, the next step is to contact the loan provider for further assistance.