Applying for Loans

To qualify for a Federal Stafford loan, or if you are a graduate and professional student who wishes to take out a Federal PLUS loan, you must first complete the Free Application for Federal Student Aid. This form also is used to determine your eligibility for other federal financial-aid programs, as well as for many state and institutional sources of financial aid. You should submit the FAFSA after Jan. 1 preceding the academic year that you’re interested in attending college.

Information you supply on the FAFSA is used to calculate your Expected Family Contribution, the amount that you and your parents are expected to provide toward your education expenses.

The financial-aid office of the college or university that you plan to attend will compare your EFC against the school’s cost of attendance to determine your financial need. The financial-aid staff then will tailor an aid package, which may include grants, work-study and loans to meet your financial need. Because loans must be repaid with interest, you would be wise to exhaust all other sources of financial aid before taking out a loan.

Master Promissory Note
If your school determines you are eligible for a Stafford or PLUS loan, you will be asked to sign a Master Promissory Note. The MPN is a legally binding contract whereby you promise to repay the loan. In many cases, you will be able to take out multiple loans throughout your college career by signing one MPN. If you are taking out both Stafford and PLUS loans, you will be asked to sign separate promissory notes for each loan. By signing the MPN, you promise to repay all of these loans. Depending on the process that your school uses, you may be able to sign the MPN online using an electronic signature.

Working behind the scenes, your school will certify your eligibility for the loan amount and forward the certification to your lender and the guarantor of your loan. These organizations will review the loan request to ensure all items are in order and that you are eligible to borrow the amount requested. If all is in order, your lender will provide you with notice that your loan has been approved and disclose the loan amount, any fees that have been deducted, the interest rate and other important information. You should keep these notices for future reference.

Disbursing the Loan Dollars
Your lender will disburse the loan proceeds to your school, based on a disbursement schedule established by your school. The amount of the loan, less any fees, typically will be sent to your school in two disbursements. Your loan dollars will be sent to your school no sooner than 30 days before school starts. If you are a first-year, first-time undergraduate student, your disbursement may be delayed until 30 days after classes begin. In some cases, your college may ask you to sign loan checks. In most cases, the loan dollars will be disbursed to the school electronically. Your school will deduct your tuition and other fees and credit any remaining balance to your account.