When do I receive the Stafford Loan funds?
- Fixed interest rate - as low as 3.86%
- No payments while in school at least half-time
The U.S. Department of Education generally requires colleges to disburse (or pay out) Title IV federal student aid funds, including Federal Stafford loans and the Federal Pell Grant, at the start of each academic term. Federal Work-Study funds are disbursed as the money is earned.
Colleges disburse federal, and, sometimes, state and institutional student financial aid funds by crediting them to the student's school account. Title IV federal student aid funds are applied first to current year charges for tuition and fees. If the student has contracted with the college for room and/or board, the college may also apply the money to those charges. With the student's or parent's permission, the money in the student account may be applied to other educationally-related charges at the college. The college may also use the money to satisfy no more than $200 in prior-year charges for tuition, fees, room and board (and with student or parent authorization, other educationally-related charges).
Any remaining credit balance must be paid or refunded to the student as soon as possible and within 14 calendar days. (If the credit balance occurs before the first day of classes, the credit balance must be paid within 14 days after the first day of classes.) Early disbursements may occur no sooner than 10 days before the first day of classes of the payment period. Refunds from a student's account may be delivered to the student by cash or check, by EFT to the student's bank account or by stored-value, debit or ATM cards. Refunds may be used by the student to pay for other educationally-related costs, such as textbooks, school supplies, transportation to/from school, rent for students living off-campus, computer equipment and software, dependent care and other personal or miscellaneous expenses.
There are no controls, however, to prevent students from using the money for eating out, entertainment, or buying the latest gadgets. It is not uncommon for students to run out of money in the middle of the academic term. So it is a good idea to budget before spending the student aid money on inessentials. Remember, every dollar you borrow will cost about two dollars by the time you repay the loan debt. Live like a student while you are in school, so you don't have to live like a student after you graduate. If you don't really need the loan money, you can send back all or part of the money to reduce your debt.
Special Disbursement Rule for Textbooks and Supplies
Colleges must generally provide students who are eligible for the Federal Pell Grant with a way to obtain or purchase required textbooks and supplies by the 7th day of the payment period, if the student will have a credit balance when the funds are eventually disbursed. The amount provided to the student must be the amount required to buy the books and supplies, as determined by the college, or the presumed credit balance, whichever is less.
Special Rules for Student Loan Disbursements
There are two special disbursement rules that apply to student loan funds:
- 30-day delay. Loan funds are subject to a 30-day disbursement delay for first-year, first-time borrowers.
- Two-disbursements rule. If the loan period is more than one payment period, loan proceeds must be disbursed once per payment period. Otherwise the loan must be disbursed in at least two disbursements, with one disbursement occurring after the mid-point of the loan period. Depending on the college, this will be either the mid-point between the first and last day of classes, or after half the number of credit hours, half the number of clock hours or half the number of weeks of instruction. The disbursements must be made in substantially equal installments with no installment exceeding half of the loan amount.
These rules may be waived if the college has a low default rate. (To qualify for the waiver, the college's 2-year cohort default rate for each of the last three fiscal years must be less than 10%. This threshold increased to 15% on October 1, 2011 with the switch to a 3-year cohort default rate.)
Colleges have more flexibility with regard to the number of disbursements for Federal Perkins Loans, Federal Supplemental Educational Opportunity Grant (FSEOG), TEACH Grant, Iraq and Afghanistan Service Grant and Federal Pell Grant funds. The regulations provide that "An institution may advance funds, within each payment period, at such time and in such amounts as it determines best meets the student's needs." Colleges may choose to disburse these funds in a single lump sum or in multiple disbursements.
Other Loan Disbursement Requirements
There are several prerequisites before the college can pay Title IV federal student aid money to the student:
- The college must verify the student's eligibility.
- The student must have registered for classes for the payment period.
- First-time borrowers must receive entrance counseling.
- The student must have signed the Master Promissory Note (MPN) for the Federal Stafford loan and the parent must have signed the MPN for the Federal Parent PLUS loan.
- Any conflicting information in the student's Free Application for Federal Student Aid (FAFSA) must have been resolved. This includes conflicts between the FAFSA form and federal income tax returns and other information available to the college.
More Questions? Ask the College!
If you have questions about when you can expect to receive your student aid funds, contact the college's financial aid administrator or bursar.
- Higher Education Act of 1965
- 30 Day Delay: 20 USC 1078-7(b)
- Mutiple Disbursement Rule: 20 USC 1078-7(a)
- Regulations: 34 CFR 668.164
Stafford Loan Frequently Asked Questions
- Am I eligible for a Stafford Loan?
- How do I apply for a Stafford Loan?
- Are there Stafford Loan deadlines?
- What's the difference between unsubsidized and subsidized loans?
- When do I receive the Stafford Loan funds?
- What are the Stafford Loan interest rates?
- How much can I borrow under a Stafford Loan?
- What is EFC and how is it calculated?
- What can I use a Stafford Loan for?
- Are there specific schools that accept Stafford Loans?
- Do I have to apply for a Stafford Loan every academic year?
- Can I receive a Stafford Loan if I have bad credit/declared bankruptcy/have late payments on credit cards?
- Will I pay any fees for a Stafford Loan?
- What are the repayment options for a Stafford Loan?
- What are the penalties for early payment or if the loan is paid in full before scheduled (deferred) payments begin?