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Disbursement
Loan disbursement is defined as the transfer of loan proceeds by the lender to a borrower, school or escrow agent. Disbursements may occur through a variety of methods:
- individual paper check;
- master check; or
- electronic funds transfer (EFT).
The Common Manual provides detailed information regarding the federal regulations governing loan disbursement. Although there are exceptions for students attending certain colleges, a Federal Stafford or PLUS loan is generally disbursed in at least two installments except in the following cases:
- A loan is made to a student attending a participating foreign school may be scheduled for a single disbursement;
- A loan made to a student enrolled in a study-abroad program, if the eligible school at which the student will receive course credit for the study-abroad program has a cohort default rate of less than 5%, may be scheduled for a single disbursement; or
- The school is part of an experimental site program and has been granted an exemption from the multiple disbursement regulation.
ISAC Rules, Section 2720.50 requires that the lender shall inform ISAC of all disbursement dates. This can be accomplished through the Lender Manifest process.
Delivery
Loan delivery pertains to the school’s processing of loan proceeds and delivery of those proceeds to the borrower. Provisions governing these processes are outlined in the Cash Management Regulations (34 CFR 668, Subpart K) and in the FFELP and Direct Lending regulations (34 CFR 682 and 685, respectively). Volume 4, Chapter 2 - FSA Handbook: Processing Aid & Managing FSA Funds provides guidance on the disbursement and delivery of loan proceeds, including cash management.
The school should provide the dates on which it would expect the lender to issue the check, master check, or generate the EFT transaction – not the date on which the school anticipates receiving the funds. In addition, the school must schedule disbursement dates that comply with applicable delivery requirements. For first-year, first-time borrowers attending certain colleges, the 30-day delayed delivery requirement may be waived.
Federal regulations [34 CFR 668.16(4); 668.32(f)] require that a school measure a student's satisfactory academic progress (SAP) in accordance with the school's published SAP policy before delivering the loan proceeds.
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