This section outlines the lender’s role in obtaining guarantees and disbursing proceeds for Federal Stafford and PLUS loans. When the loan information is submitted to the guarantor, the guarantor reviews the applicant’s eligibility based on the information provided and information on its database. This information must meet federal requirements and applicable guarantor policy, such as ISAC’s One-Lender Rule (ISAC Rules, Section 2720.41) and One-Holder Rule (ISAC Rules, Section 2720.42).
In most cases, a disbursement schedule must ensure that a Federal Stafford or PLUS loan is disbursed in two or more installments regardless of the loan amount. ISAC Rules, Section 2720.50 outlines procedures for loan disbursement(s) for ISAC-guaranteed loans. The lender is responsible for informing ISAC of all disbursement dates.
Once a loan is guaranteed, the loan funds are disbursed by the lender/servicer to be delivered to the borrower by the school. Disbursement is defined as the transfer of loan proceeds by the lender to borrower, school or escrow agent.
There are specific cash management regulations that define the process for verifying the borrower’s eligibility to receive the funds and the timeframe during which they must be delivered to the borrower by the school.