How Long Does It Take to Get a Student Loan Disbursement?

Wondering how long does it take to get a student loan disbursement? Here’s the short answer to this common question. It can take between 1 and 3 weeks for federal student loans to disburse. Disbursement of private student loans can take between 2 and 10 weeks. 

So why does it take so long for student loans to get disbursed? Understanding the process can help you better plan your finances. Here’s a detailed answer to the question – how long does it take to get a student loan disbursement? 

A student holding money.

What is the student loan disbursement?

Most students are surprised to know that it can take a while for the disbursement of student loans. Lenders typically use words like ‘get your loans approved quickly,’ which can be misleading. A student taking a loan for the first time assumes that it means they’ll receive the funds quickly. However, loan disbursement is not the same as loan approval. And this makes all the difference. 

Loan approval is the process of assessing whether you’re a credible borrower. That itself takes a few weeks. If you pass all the checks and are approved, the lender sends you a loan agreement with details of your interest rate, payment modules, fees, and other loan terms. You go through the details and sign the loan document if you agree with all the terms. When the lender gets the signed documents back, only then will they organize the funds and transfer them to your account. 

How does it work? 

The process from submitting your loan application to the actual student loan disbursement can take time. The exact amount of time it takes depends on several factors. The first is the type of loan you’re taking. Federal student loans get disbursed faster than private student loans. This is because of the different ways these two entities process student loans. 

Where the funds are being sent can also affect how long it takes for student loans to disburse. The funds usually transfer to the school’s account in scheduled disbursements. This could be at the beginning of the semester, quarter, or trimester. The school then applies the funds towards tuition, fees, and other applicable expenses such as room, board, and books. Any balance transfers to your account in the form of a student loan refund. This can take a little longer than if the funds were sent directly to your account. You don’t have a choice in this regard – it depends solely on the lender. 

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How federal student loan disbursement works

Getting a federal student loan is relatively easier and federal student loans get disbursed faster. You should know that ‘faster’ does not mean ‘immediately’. It still takes about one to three weeks, especially for first-time borrowers. 

Here’s a detailed look at the federal student loan process. It will help you understand how long it takes to get a federal student loan disbursement from the time you apply to the time you receive the funds. 

Step 1- Apply for federal student loans

Federal student loans are funded by the federal government. Filing the FAFSA is the mandatory first step to accessing federal student loans. The FAFSA or Free Application For Federal Student Aid is an application that qualifies you for all types of federal financial aid. This includes federal student loans as well as need-based grants, merit-based scholarships, institutional aid, and work-study.  

Important things you should know about the FAFSA: 

– You can submit your FAFSA anytime between October 1 and June 30 for the next academic year. Aid is disbursed on a first-come first-served bases. It’s best to submit your application closer to the opening date to get the maximum aid you qualify for and ensure on-time disbursement.

– A FAFSA application is only valid for one academic year. You have to submit the FAFSA every year to receive financial aid for that academic year. 

Step 2 – Review and accept your offer

After the federal government receives your FAFSA, it will calculate your aid eligibility. Your financial circumstances will determine the amount of aid you qualify for. This may be different every year depending on whether your financial circumstances have changed. 

Colleges that have accepted your application will put together a financial aid package for you based on your FAFSA. They will send you a detailed financial aid award offer along with your acceptance letter. Your financial aid package will vary among colleges as each institution calculates it differently. You should take the time to review all financial aid award offers carefully. This will determine how much you’ll have to pay toward cost of attendance (COA). It will also ultimately determine which college you choose to attend.   

Step 3 – Sign the Master Promissory Note

Once you’ve decided which college to attend, you’ll have to sign a Master Promissory Note or MPN. The MPN is a legal document that’s available on the Federal Student Aid website. Signing this document is mandatory for first-time borrowers. It states that you understand the implications of taking a student loan and agree to the terms of the loan. Most importantly, it states that you promise to pay back the loan with accrued interest. 

It’s important to note your federal student loans will be disbursed only after you sign and submit this Master Promissory Note. When you submit the signed MPN will determine how long it will take to get your student loans to disburse. To get the funds on time, make sure to complete this formality as quickly as possible. 

Step 4 – Set up a Direct Deposit account

Federal student loans disburse into your school’s account. Your school will use the money toward tuition and pay all other applicable expenses. Any funds left over transfer to you to use for other education-related expenses. Your school will not transfer the funds to any bank account though. You need to set up a specific type of account called a direct deposit account in order to receive these funds. 

It’s easy to open a direct deposit account through your Federal Student Aid account or student portal. You will need your bank account number and bank’s routing number to open this account. 

Step 5 – Wait for your federal student loans to get disbursed 

You’ve completed all the formalities at your end. Now all that’s left is waiting for the funds to transfer.  The time it takes can be a bit longer for first-time borrowers. 

If you’re a first-year student and first-time borrower, there may be a thirty-day delay in the disbursement of student loans. From your second year forward, your federal student loans will get disbursed ten days before the first day that classes start. In either case, you will receive the funds on time as long as you apply on time. 

How private student loan disbursement works

The private student loan disbursement process is different from the federal student loan process. These loans are funded by banks, credit unions, and private financial institutions. 

There are two types of private student loans – school-certified loans and direct-to-consumer or uncertified loans. It can take anywhere from 2 to 10 weeks to get a student loan disbursement in either case. 

The difference between the two is that school-certified loans are transferred to your school’s account. Any outstanding amount transfers to your direct deposit account. Direct-to-consumer loans transfer directly into your bank account. You’re responsible for making all tuition and other payments from your student portal. 

Here’s a detailed look at the private student loan process. It will help you understand how long it takes to get a private student loan disbursement from the time you apply to the time you receive the funds. 

Step 1- Do your research 

Loan requirements, interest rates, repayment schedules, and loan terms vary considerably among lenders. This can make a huge difference to the total cost of borrowing. That’s why it is so important to spend time doing your research and comparing lenders. 

Check interest rates and fees. Some lenders offer low-interest rates but make up for it by charging higher fees. Others may have easy eligibility requirements but strict penalties for late payments. Read lender reviews. Compare lenders to identify one that’s the best fit for your unique circumstances.  

Step 2 – Apply with a cosigner

Private lenders usually only approve loan applications from borrowers who have good credit. As a student, you probably haven’t built your credit score, making loan approval more difficult. The few lenders who do approve you will almost certainly quote you a higher interest rate. Applying with a creditworthy cosigner makes approval easier and usually receives better rates. A creditworthy cosigner meets the lender’s eligibility requirements. 

A cosigner can be a parent, relative, or anyone willing to share the responsibility of the loan with you. When you apply with a cosigner, the lender will use the cosigner’s credit history to calculate your personalized interest rate.   

Step 3 – Fill out and submit your loan application along with the necessary documents

Once you’ve identified the best lender for you, it’s time to fill up the paperwork. The application form will ask you for personal and contact information. It will also ask for detailed financial information including monthly income, bank statements, and a list of assets. If you’ve applied for the loan with a cosigner, they will also need to submit their personal and financial information. 

The application form will list all the documents you and your cosigner need to submit. Make sure to submit all requested documentation for the quickest processing. 

Step 4 – Review and accept the terms of the loan 

After you’ve submitted your application, the lender will review the details and documents. They will then put together a personalized loan package based on these details and send it to you. Take time to read through all details carefully and make sure it is what you had agreed on. If you find any discrepancies or need any clarifications, don’t hesitate to call the lender and ask. Once you sign the loan papers, you are legally bound to the terms and can’t make any changes later. 

Step 5 – Wait for your private student loans to get disbursed

From the time you submit your application, it can take about 2 – 10 weeks for the disbursement of private student loans. Applying early will ensure that you receive the funds before any payment deadlines.  

To recap: The answer to ‘how long does it take to get a student loan disbursement’ is: 

  • 1-3 weeks for federal student loans 
  • 2-10 weeks for private student loans 

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