How Student Loans Are Disbursed: Timeline and Process Explained

Nearly half of undergraduate students' families borrowed money to pay for college in the 2024-25 school year, according to Sallie Mae's study, “How America Pays for College 2025.” If you're planning to take out a student loan for your education, you might be wondering when you'll receive the funds.

Here's what you need to know about how student loans are disbursed and when it happens.

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How are student loans disbursed?

Student loans and other forms of financial aid are sent directly to your school. This generally applies to both federal and private student loans, although the disbursement timelines may vary for each type. Once the school receives your loan money, it will apply it to your tuition, room and board, and other fees before distributing the rest to you.

When do student loans get disbursed?

When your student loans are disbursed depends on the type of loans you're getting and when you applied for them.

“Generally, getting a federal student loan can take anywhere between a few weeks and a few months,” says Bethany Hubert, a financial aid specialist at Going Merry, a scholarships app.

“Getting a private student loan can generally take less time than getting a federal student loan because the application and approval process requires fewer steps,” adds Hubert.

If you've applied through the Free Application for Federal Student Aid (FAFSA) and are approved, your federal loans should arrive by the start of the semester. Private loans, on the other hand, generally arrive a few weeks after you've been approved, but the timeline varies based on your lender's policies.

“A common area of confusion that we see is around the certification process,” says Hubert. “If your loan is approved, the next critical step is school certification, which can take a few extra days or weeks. During this stage, your lender sends the loan details to your college or university's financial aid office where they review the loan request to ensure it aligns with your cost of attendance (COA).”

Once the loan is certified, the funds can be released to your school. However, Hubert notes that different schools handle certifications at different speeds. Some could take days, while others might take several weeks.

“If you're nearing the start of the semester or need the funds by a specific deadline, it's crucial to apply for private loans as early as possible to account for both the approval and certification processes,” says Hubert.

Learn More: When To Apply for Student Loans: Deadlines and Best Practices

What happens after your loan is disbursed?

When your school receives your loan funds, it first applies the money toward your tuition and school fees. If you're living in campus housing, it will also apply money toward your room and board costs.

Once the school's costs are covered, you may have leftover loan funds. The school will send you the remaining funds in the form of a student loan refund. You'll receive your refund in at least two disbursements — typically one per semester. You can use this money for living expenses and other school-related costs.

Once you receive the excess funds, you have 120 days to cancel some or all of your federal student loans without paying interest or fees. If you took out a private student loan, the cancellation window varies, so check with your lender.

If you choose to cancel part of your loan, you'll need to return any funds you've already received. However, this can help you avoid unnecessary interest charges and keep your total debt lower.

Can I use excess funds for living expenses?

If your student loan amount exceeds what you owe the school, you could end up getting some money back. The good news is you can use this money for living expenses and other education-related costs.

“Since students can borrow up to the full cost of attendance (which includes room, board, books, and supplies), any extra will be refunded, and they can use the money for these things,” says Robert Farrington, founder of The College Investor. “If a student is frugal, they can potentially save the money,” he adds.

However, there are also restrictions on what you can use the funds for. Student loan funds are intended to pay for the cost of attendance at college. This typically includes tuition, food and housing, books, supplies, transportation, school fees, and other costs necessary to attend school. You can use your loan funds for any of these expenses, but can't use them for extras like entertainment, non-essential purchases, other debt payments, etc.

Even if you receive extra loan funds, it's important to remember that they still come at a cost. “Realize that interest is likely accruing on the loan, so over-borrowing is not a good idea,” says Farrington.

If you plan to use your student loan refund for living expenses, consider how you can budget the funds to make them last. For example, if you have $2,500 in excess funds to last you the entire semester, divide that amount by the number of months in the semester. Aim to spend no more than that each month to ensure the money lasts.

Common student loan disbursement issues

The following issues could impact your loan disbursement:

• Missing deadlines: If you fail to submit your FAFSA by the federal deadline, or you miss your school or state deadline, you won't be able to receive federal student loan funds. And while private student loans don't have an official deadline, applying too close to the start of the semester could mean you don't get the funds in time to pay for tuition and other expenses.
• Making application errors: Making mistakes on your FAFSA or private student loan application could delay your loan disbursement. To avoid this, carefully go over your application multiple times before submitting it.
• Not completing entrance counseling: If you're a first-time borrower or a graduate student applying for federal loans, you're required to complete entrance counseling before you can get your loan disbursement. Entrance counseling is an online session that explains your rights and responsibilities as a borrower. Failing to complete counseling will result in not getting your disbursement.

What to do if your loan disbursement is delayed

If your student loan disbursement has been delayed, there could be a reasonable explanation, such as an administrative process or a missing requirement.

“Student loans are usually disbursed about one to two weeks before the start of the semester,” says Farrington. “The only exception is first-time federal student loan borrowers. There may be a 30-day delay for first-time borrowers to prevent fraud. However, schools are aware of this, and this typically doesn't impact students.”

Another possible explanation is that you've failed to complete a requirement to get your loan. For example, if you don't sign your Master Promissory Note, a document that explains the terms and conditions of your loans, you won't receive your disbursement.

If neither of those applies, contact your school's financial aid office to ask about the delay. It could be that you applied for your private student loan a little bit late, and it hasn't been sent to your school yet. It's also possible the school has your loan money, but there's a delay in disbursing the excess funds to you.