How to Avoid a Common Student Loan Nightmare During the Holidays

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Updated on Wednesday, December 9, 2015

Students throwing graduation hats

You’re a few days out from heading back to school after winter break. You’re making the rounds, saying good-bye to your friends and family back home. All of a sudden, your phone goes off. You have an email. It’s from school. You open it up, expecting it to tell you how to logon to Blackboard, or some other inane triviality, but it doesn’t. Instead, it tells you that your account is overdue, and if you want to go back to class, you’ll have to pay it in full or talk to financial aid about payment plans.

You’re confused and agitated. Student loans cover the whole of your tuition. There’s no reason they shouldn’t be paid. You keep reading. On top of refusing to let you go back to class, the school informs you that you will be responsible for late fees on the account as the tuition due date has passed.

It’s a nightmare situation that happens to many students. The good news is, most schools will resolve it with little effort. Before we delve into the solution, though, let’s take a closer look at what’s causing the problem.

The Problem: Disbursement Dates

Federal Loans

First, let’s assume that your loans are Federal. Schools uniformly deal with Federal Aid frequently, so errors in this arena are generally felt by a large percentage of the student populace, and are likely to be remedied before you can even make an inquiry.

Schools are not allowed to draw disbursements until ten days before a term begins. If a school’s tuition deadline is before that ten day period, their systems are likely to go haywire, sending out notifications like the one you received. Schools are aware of this timeline, so it’s not a problem you’re likely to see. They will either have appropriately timed deadlines, or have your account marked as “Pending Aid.”

What likely did happen, then, is that your school did not apply your funds quickly enough. Once loans have been disbursed, the school has three days to apply them to your student account. If there was a computer error, or the financial aid office is just flat out behind, it may result in you getting a similar notification.

Private Loans

Are your loans private? Then you have a whole different set of issues. Disbursement dates are more dependent on your lending institution, or the loan servicer. Getting loans disbursed around the holidays can be a delicate dance. Bankers hold bankers’ hours; between Christmas and New Years’, your loan disbursements can get severely disrupted.

Your school should also be aware of this, but with so many students, it’s easy to see one of the adjusted disbursement deadlines slip through the cracks. Unlike federal loans, the same thing isn’t happening across the vast majority of the student body, so uncovering this problem may take some digging.

After private student loans are disbursed, it can take some schools up to a month to apply them to your account. This means that if the holidays cause even a day or two of delays in processing disbursement, you may miss your tuition deadline, even if it’s a few weeks out.

With such a large potential gap between disbursement and processing, it’s wise to sit down with your financial aid office prior to going on winter break. Make sure you know:

  • When the loan will be disbursed
  • Any holidays your lender or servicer may have that could disrupt the disbursement date
  • The tuition deadline
  • The approximate time it will take Financial Aid to apply your disbursement.

Ask for print outs of related documents for your own records.

The Solution

The best thing you can do in these situations is stand your ground. In either case, whether your loans are federal or private, your account should be marked as “Pending Aid.” If it is not, talk with someone in your financial aid office. This communication is likely going to require more than email; pick up the phone, or, better yet, sit down with someone in person.

The path of least resistance would be to get on a payment plan, and start making payments so you can go to class. When your loan comes through, you can return the portion that you’ve already fulfilled on your own. This method is not possible for all college students, though, and doesn’t resolve the issue of any late fees that may be tacked onto your account.

A better option, when the financial aid office is no help, is to appeal to the bursar. Explain your problem calmly, but firmly. If the problem is with federal loans, and they have not applied them to your account within the timeline allotted by federal regulations, it’s going to be something the bursar wants to know about. If you were prepared and got documentation of deadlines and disbursements before break for your private loans, bring it with you to your meeting.

Ultimately, it comes down to being prepared. Federal loans are less likely to cause you issues, and when they do, the financial aid office is more likely to right things without issue thanks to the large percentage of the student body it affects. Private loans require more coordination, and while it would be nice if you never had to worry about disbursement dates and late fees, arming yourself with the appropriate knowledge can help you head off any problems before they arise.

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