How Long Does a Student Loan Take To Process?
Whether you are about to or have recently graduated high school or are thinking about changing your career path, you may be considering attending college. While a college degree can offer numerous opportunities, there is a downside associated with attending college – and it’s a big one. It’s expensive.
The cost of attending college has skyrocketed in recent years. Even earning an associate’s degree from a local community college can cost thousands of dollars, and the price tag for a four-year degree from a public or private institution can amount to tens of thousands of dollars.
If you would earn a degree and don’t have access to the capital to do so, student loans may be a viable option; however, obtaining a student loan does require some planning. For example, you will need to apply for a loan, get approved, and then have the funds from your loan dispersed.
In other words, student loans do not provide access to an instant cash flow.
The amount of time the student loan process takes varies and depends on several factors. The type of loans you are applying for, your credit history, whether or not you will have a co-signer on the loan, and what institution you will be attending all have an impact.
To illustrate, the process for federal student loans can take several months. If your loan is approved and there are any leftovers after they have been dispersed to your college, it can take even longer to receive the additional funds. Private student loans, while faster, do not offer some of the benefits that come with federal student loans.
As such, you may want to consider them a last resort if you need to borrow money to pay for your college education.
If you think that you will need to take out student loans in order to pay for college, understanding the process and the timelines that are associated with it is important. In this guide, we’ll cover the process for both federal and private student loans.
The Federal Student Loan Process
The timeline for federal student loans varies from person to person; however, generally speaking, it takes between a few weeks and a few months from filling out and submitting the application to disbursement of the funds.
For first-time borrowers and first-time undergraduate students, obtaining a federal student loan may take longer. For instance, you may need to wait until 30 days after the start of the enrollment period before student loan funds can be disbursed to the school.
Your college may suggest applying for federal student loans at least 4 to 6 weeks before you need the funds to cover your attendance cost.
The following is an overview of the steps that the federal student loan process entails:
- Apply for a federal loan. You’ll first need to fill out the Free Application for Federal Student Aid (FAFSA). It takes about an hour to complete the application. You will need to provide the following information on your application.
- Estimated network
- Number of people living in your household
- Number of people living in your household who attend school
Dependent students will need to provide financial information both for themselves and their parents. Information about debts and credit history will not be necessary for the graduate PLUS or Parent PLUS loans; however, a credit check will be.
- FAFSA Processing. Once your application is submitted, it can take between 3 and 5 days for your FAFSA to be processed. If you send the application via mail, it can take up to 10 days to process once it has been received. Following processing, you will receive a Student Aid Report (SAR), which will highlight details from your FAFSA, as well as your Expected Family Contribution (EFC), which determines your eligibility for federal aid, including both student loans and Pell grants.
- Financial aid award. Your college will receive a copy of and will review your SAR to determine how much aid they will offer you. The amount of time this will take varies from school to school; however, it can take a month or more before a formal award letter is issued. If you accept the award as-is, you can proceed to the next step; however, if the amount of aid awarded isn’t enough, you can appeal your award for financial aid. The time it will take for your school to process the appeal varies and can take several weeks to several months.
- Entrance counseling. As a condition of receiving federal student loans, the US Department of Education requires all undergraduate and graduate borrowers to complete entrance counseling. Counseling takes an average of 30 minutes to complete. For PLUS credit counseling, the parents of dependent undergraduates and graduates or professional students who are taking out PLUS loans and have a concerning credit history will need to either obtain an endorser or document extenuating circumstances that satisfy the Education Department. It takes about 20 to 30 minutes to complete PLUS credit counseling.
- Promissory note. Signing a Master Promissory Note is the final step in obtaining a federal student loan. This document, which is legally binding, acknowledges your responsibility for repaying your federal student loans. All schools have their own processes in place regarding the signing of the Master Promissory Note. Speak with the financial aid office at your college to inquire about signing this document, which can be done either in person or electronically.
Federal Student Loan Disbursement
Colleges will not disburse funds for either undergraduate or graduate student loans until borrowers have completed their entrance counseling. First, the college will apply the funds from your loan to tuition, fees, and, if you live on campus, room and board. Any funds that are remaining can be disbursed directly to you.
If you are a first-time borrower or a first-time student, you may need to wait up to 30 days after your term begins to receive your student loan refund. If your parents have taken out a PLUS loan on your behalf to assist you with covering the cost of undergraduate school, they can choose to have any additional funds disbursed to you.
Private Student Loan Process
Because they offer low, fixed interest rates and the repayment terms are flexible, federal student loans tend to be more attractive to most borrowers. However, federal student loans may not provide enough funds to cover the cost of your education. If that’s the case, you may want to consider applying for private student loans to fill in any gaps.
It is possible that approval for private loans may be faster than approval for federal loans. For example, rather than a few weeks, you may receive a decision regarding approval within a few business days of submitting your application, and in some cases, you may even receive a decision on the same day.
There aren’t any specific deadlines for applying for student loans. Usually the funds are disbursed to the school within 10 days of the beginning of the term.
The following is an overview of the process for private student loans.
- Complete the application. Once you have researched your options and chosen your lender, you can submit your application, which usually can be done online.
The information that you will need to provide varies; however, it typically includes the following:
- Full name
- Date of birth
- Social security number
- Phone number
- Email address
- School name
- Expected graduation date
- Estimated cost of attendance
- Amount requesting to borrow
- Household income
On average, it takes about an hour to complete an application for a private student loan.
- Application processing. After submission, the lender will review your application to determine if you are eligible for any of the loans that they offer. The amount of time it will take to receive a decision varies from lender to lender; for example, it may be as short as a few minutes to as long as several business days. Before finalizing their decision, the lender may ask for additional information, which can extend the process. If your loan is approved, you can proceed to the next step; however, if your loan is denied, you can try to reapply with a co-signer or look for a new lender.
- Loan acceptance. If your private loan is approved, the lender will send you the necessary paperwork that you will need to read, sign, and send back to accept the loan. Before you sign, it’s important to note that you should review all of the terms and conditions so that you are informed of what you are borrowing.
- Certification. Once you have accepted your private student loan, your college will have to certify the funds. Basically, your college will work with the lender to verify your enrollment and the cost of attendance. It can take a few weeks for certification.
- Loan disbursement. Finally, the loan will be disbursed. The school will set the disbursement date, and as previously mentioned, this is usually within 10 days of the start of a term.
Sarah is an accomplished educator, researcher and author in the field of testing and assessment. She has worked with various educational institutions and organisations to develop innovative evaluation methods and enhance student learning. Sarah has published numerous articles and books on assessment and learning. Her passion for promoting equity and fairness in the education system fuels her commitment to sharing insights and best practices with educators and policymakers around the world.