Federal Student Loan Disbursement

Once you have been approved for a federal student loan, how do you get your money? Federal student loan disbursement is through two sources, your school's financial aid office or a private lending institution. Which route your money takes depends on the type of loan you have.

Money Through Your School

If your federal student loan is through the government's Direct Loan program, the money comes from federal dollars authorized by Congress and controlled by the Department of Education. Your college or vocational school works directly with the Education Department to receive the funds on your behalf and disburse them to you.

Money From a Private Lender

If your federal student loan is through the Federal Family Education Loan program, which is the largest sources of student loans, the funds come from a private lending institution but are guaranteed by the government. The lending institution with which you are dealing originates the loan and disburses the funds to you. If you default, the government has guaranteed payment. However, unless you have received forgiveness for your student loan from the government, you are still liable for the unpaid amount.

In each example, you begin the process by applying for your federal student loan with the Free Application for Federal Student Aid, or FAFSA, online system.

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