Loan Life Cycle
The life cycle of a loan is described below to help you understand the loan process. The life cycle has seven phases and a number of steps in each phase, from applying for financial aid to paying off the loan. For a high school senior, this process could span over 15 years.
The following describes the typical life cycle of a federal student loan.
Phase 1: Identifying Need
Student and parents:
* Complete and submit the Free Application for Federal Student Aid (FAFSA). This form will help determine your eligibility.
* Review the Student Aid Report (SAR). Your SAR will summarize the information you provided on the FAFSA and indicates your Expected Family Contribution (EFC).
* Compare financial aid award letters received from schools.
Phase 2: Loan Application
* Borrower requests loan by submitting a loan application.
* School certifies student eligibility.
* Lender approves borrower loan application.
* In the case of FFELP loans, a guarantor provides guarantee that the loan will be repaid.
Phase 3: Disbursement
* Lender sends loan proceeds to the school by check or electronic funds transfer.
* School may contact borrower for check endorsement.
* School applies loan proceeds to student's outstanding bill and turns over any remaining funds to borrower.
* Under most federal loan programs, loan proceeds are not disbursed to first-year undergraduates who are also first-time borrowers until the student completes the first 30 days of their program of study and participates in entrance counseling.
* Lender sends parent borrower a repayment disclosure statement for Federal PLUS loan.
* Parent borrower with Federal PLUS loans begins repayment after full disbursement. Normally, the first payment is due no later than 60 days after disbursement. However, an in-school deferment may be an option.
* For loans requiring credit, lender notifies credit bureaus that loan proceeds have been disbursed.
Loan Life Cycle Continued...
"An investment in knowledge always pays the best interest. ~Benjamin Franklin"
Latest news
