Disbursement: How The Money Gets To Student Or Loan

If you are thinking about getting a federal student loan, then you are probably wondering how the loan money is disbursed. Well, there are two different distribution channels that the government uses to send out the money to these federal student loans. The first of these channels is the Federal Direct Student Loans, which is also known as just Direct Loans or FDLP. This channel is funded directly from the United States Treasury Department, and it is considered public capital. When it leaves there, it will pass through the Department of Education. After that, it will go to the college or university that you will be attending. Then finally it will be passed on to you. This whole process will not take as long as you would think it would take, only a few weeks.

There is also the Federal Family Education Loan Program. This is commonly referred to as the FFEL or the FFELP. This distribution channel is funded by banking institutions, and this is considered private capital. These include banks, credit unions, and even savings and loans providers. This gives the student or parent the advantage to be able to have payment options just as if they were taking out a regular home or consumer loan. You are not able to get that with the Federal Direct Student Loans distributer. FFEL's distribution process is very similar to that of FDLP, except that they pass through the banking institutions instead of the Department of Treasury. FFELP provided about sixty-six percent of all of the federally subsidized loans in 2005 alone. Also, more than six thousand colleges, universities, and other schools took part in the Federal Family Education Loan Program, which represents three-fourths of the federal student loan volume. It's obvious that loans through FFELP are used the most, probably because you can get a better repayment option.