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When Does a Parent PLUS Loan Get Disbursed? A Seasoned Expert’s Guide

The burning question on every parent’s mind contemplating a Parent PLUS loan is, “When will the money actually arrive?” The answer, while straightforward, has nuances. Generally, a Parent PLUS loan is disbursed to the school after the loan has been approved, the credit check has cleared, the Master Promissory Note (MPN) has been signed, and typically a few days before the start of the academic term for which the loan is intended. However, the exact timing depends heavily on the school’s policies and procedures and how they coordinate with the U.S. Department of Education.

Understanding the Disbursement Process

The disbursement of a Parent PLUS loan is not an instantaneous event. It’s a carefully orchestrated process designed to ensure funds are used appropriately for educational expenses. Let’s break it down:

Application and Approval

First, the parent borrower must complete the Parent PLUS loan application online at studentaid.gov. This involves providing detailed information about the student and the parent, including Social Security numbers, income details, and the loan amount requested. A credit check is a mandatory part of the process. Approval hinges on a clean credit history, specifically the absence of adverse credit events like defaults or bankruptcies within the past five years.

Master Promissory Note (MPN)

Upon approval, the parent borrower must sign a Master Promissory Note (MPN). This is a legally binding agreement that outlines the terms and conditions of the loan, including the interest rate, repayment schedule, and borrower responsibilities. The MPN is a crucial document and must be completed before any funds can be disbursed.

School Certification

The school plays a critical role in the disbursement process. After the loan is approved and the MPN is signed, the school certifies the loan amount. This means the school confirms that the student is enrolled, that the loan amount requested does not exceed the student’s Cost of Attendance (COA) minus any other financial aid received, and that the student meets the eligibility requirements for federal student aid.

Disbursement Timing

Once the school has certified the loan, the funds are sent electronically from the U.S. Department of Education to the school. The timing of this disbursement is determined by the school’s academic calendar and disbursement schedule. Many schools disburse funds shortly before the start of each semester or term. This is to ensure that the money is available to cover tuition, fees, and other educational expenses at the beginning of the academic period.

Disbursement Notifications

Both the parent borrower and the student are typically notified by the school when the loan has been disbursed. This notification usually includes the disbursement date, the loan amount, and instructions on how the funds will be applied to the student’s account.

Excess Funds

If the Parent PLUS loan amount exceeds the student’s charges at the school (tuition, fees, room, and board), the school will refund the excess funds to either the parent borrower or the student, depending on the parent’s preference indicated during the loan application process. This refund can be used for other education-related expenses such as books, supplies, and transportation.

Factors Affecting Disbursement Timing

Several factors can influence the timing of the Parent PLUS loan disbursement:

School Disbursement Schedule: Each school has its own disbursement schedule. It’s essential to check with the school’s financial aid office for specific dates.
Application Processing Time: Delays in processing the loan application, whether due to incomplete information or high application volume, can push back the disbursement date.
MPN Completion: Failure to complete the MPN promptly will delay the disbursement.
School Certification Delays: If the school is slow to certify the loan, the disbursement will be delayed.
Bank Processing Times: While electronic transfers are generally quick, there can be minor delays due to bank processing times.

Parent PLUS Loan FAQs: Your Questions Answered

Here are some frequently asked questions about Parent PLUS loan disbursements to provide you with more valuable information:

1. Can I get a Parent PLUS loan disbursed directly to my bank account?

No, Parent PLUS loan funds are never disbursed directly to the parent borrower’s bank account. The funds are always sent directly to the school, which then applies them to the student’s account. Any excess funds after covering school charges will be refunded according to the parent’s preference.

2. What happens if the school doesn’t disburse the full loan amount?

The school will only disburse the amount necessary to cover the student’s Cost of Attendance (COA) minus any other financial aid. If the initial loan amount requested is higher than what’s needed, the school will reduce the loan amount accordingly.

3. How will I know when the Parent PLUS loan has been disbursed?

The school typically sends an email notification to both the parent borrower and the student when the loan has been disbursed. You can also check the student’s account statement or contact the school’s financial aid office.

4. What if my Parent PLUS loan disbursement is delayed?

Contact the school’s financial aid office immediately to inquire about the delay. Common reasons include pending documentation, school certification delays, or processing issues.

5. Can I cancel a Parent PLUS loan after it’s been disbursed?

Yes, you have the right to cancel all or part of a Parent PLUS loan within a specified timeframe (usually 120 days from the disbursement date). Contact the school’s financial aid office and the loan servicer to initiate the cancellation process.

6. What happens to the Parent PLUS loan if the student withdraws from school?

If the student withdraws from school, the school will determine if any portion of the loan needs to be returned to the lender. This is based on the school’s refund policy and federal regulations. You may still be responsible for repaying a portion of the loan, depending on when the student withdrew.

7. Does the Parent PLUS loan disbursement affect my credit score?

The initial credit check required for approval will result in a hard inquiry on your credit report, which can slightly lower your credit score. Additionally, the loan itself will be reported to credit bureaus, and responsible repayment can help build your credit.

8. How does the disbursement process differ between semesters or academic years?

The disbursement process is generally the same for each semester or academic year. However, you may need to reapply for the Parent PLUS loan each year, depending on your individual circumstances and the school’s requirements. You will also need to complete a new MPN if the previous one has expired (MPNs are typically valid for 10 years).

9. Can I request a specific disbursement date for my Parent PLUS loan?

No, you cannot request a specific disbursement date. The disbursement date is determined by the school’s disbursement schedule, which is typically set to coincide with the start of each academic term.

10. What if the student’s enrollment status changes after the loan is disbursed?

If the student’s enrollment status changes (e.g., dropping from full-time to part-time), the school will recalculate the student’s eligibility for financial aid. This may result in a reduction of the loan amount or a requirement to return a portion of the disbursed funds.

11. Are there any fees associated with Parent PLUS loan disbursements?

Parent PLUS loans do have loan fees, which are a percentage of the loan amount. These fees are deducted proportionately from each loan disbursement. The fee percentage can change annually, so check the most up-to-date information on the studentaid.gov website.

12. What happens if the school closes after the Parent PLUS loan is disbursed?

If the school closes before the student completes their program, you may be eligible for a closed school loan discharge. This means you may not have to repay the loan. Contact the loan servicer for more information and to apply for a discharge. You will need to provide documentation of the school closure.