You’ve applied for financial aid, agreed to take out a student loan or two, and are about to head off to college. But when will you receive your “student loan disbursement,” and will the funds go to you or your school?

If you’re borrowing student loans, it’s crucial to understand how student loan disbursement works. This guide will explain how student loans are distributed, whether you’re borrowing from the federal government or a private lender.

What is student loan disbursement?

Student loan disbursement is just a fancy term for the payout of funds from your lender. Note that after you agree to borrow a loan, you typically don’t get the money deposited in your bank account right away.

Instead, you have to wait for a certain period of time while your lender gets your application in order. You might also have to take various steps before your lender will disburse the funds, such as student loan entrance counseling.

Before your student loan is disbursed, both your school and your lender should notify you in writing that the money is on its way. This notification should also detail how much you borrowed and when and how you will receive your funds.

When will your student loans be disbursed?

In most cases, you’ll receive your loans at least 10 days before classes start. If you’re a first-time borrower, you could have a waiting period of 30 days after your first enrollment period.

Typically, student loans are disbursed in two payments a year — once per semester. To confirm this is the case at your school, reach out to your college’s financial aid office for more information.

Depending on whom you borrowed from, your lender might send the money to your school’s financial aid office, where it will be applied to tuition and fees. If there’s a difference left over, the school will then return that money to you to use on books, food or other living expenses.

That said, the process might be different, depending on whether you borrowed federal student loans from the Department of Education or private student loans from a bank or credit union.

How federal student loans are disbursed

If you submitted the Free Application for Federal Student Aid (FAFSA), you put yourself in the running for federal student loans from the government. These federal student loans include subsidized and unsubsidized direct loans, as well as PLUS loans, which your parents can apply for separately.

If you’re a first-time borrower, you’ll need to complete student loan entrance counseling before your funds can be disbursed. Found online at the Federal Student Aid website, entrance counseling goes over your responsibilities as a borrower. It takes just 20 to 30 minutes to complete.

Once your loan is ready to be disbursed, the Department of Education will send it directly to your school. Your school will apply that money to cover tuition and any other fees. As noted above, if there’s a remainder left over, your school will send it to you.

You can then use that money to cover living expenses throughout the semester. Alternatively, you could return the loan money so you don’t end up paying interest on it. In fact, you have a 120-day window after the loan is disbursed during which you can return some or all of the funds.

After that time, you can still return any left over loan money, but you might have to pay a small amount of interest if it has accrued. As you know, student loans aren’t free money, so it’s often best to minimize the amount you borrow in order to make your repayment quicker and easier.

If you can cover living expenses with a part-time job or scholarships instead of loans, you’ll have lower student loan payments after graduation.

How private student loans are disbursed

Although federal student loans tend to have the best interest rates and benefits, they don’t always cover the full cost of college. If that’s the case, you might decide to borrow from a private lender, such as a bank, online lender or credit union.

When it comes to disbursement of private student loans, each lender sets its own policy.

Some lenders transfer the loan directly to your bank account shortly after your application is approved. In this case, it’s your responsibility to send the funds to your school’s financial aid office to pay your tuition bill. You’re in charge of handling the money, paying tuition and using any leftover funds toward living expenses (or returning it to your lender).

On the other hand, your lender might act similarly to the federal government and disburse the loan directly to your school. When you borrow a school-certified private student loan, the lender typically sends your funds to your school rather than your own bank account, after first getting confirmation of your enrollment status, anticipated graduation date and cost of attendance.

As with federal student loan disbursement, you should receive any remaining money after your loan has been applied to tuition and fees.

Student loan disbursement after consolidation or refinancing

Current college students aren’t the only ones who have to wait around for their student loans to be disbursed. If you apply for student loan consolidation or refinancing after you graduate, you’ll also need to track the payout of funds from your new loan.

If you’re looking to simplify repayment of your federal student loans, you might roll them into one new direct consolidation loan. But the consolidation process takes 30 to 90 days to complete, so you don’t want to stop making payments on your current loan until your new one is up and running. Make sure your consolidation loan has been disbursed before switching your method of repayment.

The same goes for student loan refinancing, which involves turning one or more of your student loans into a new private student loan. Like consolidation, refinancing helps you simplify repayment. Plus, it has the added perk of potentially getting your a lower interest rate, so you can save money on your debt.

But here, too, you’ll need to wait a few weeks for your refinanced student loan to be disbursed before stopping payments on your old loans. Otherwise, you could end up accidentally falling behind on your bills.

Find out if your student loan money is on its way

In most cases, your student loan disbursement is sent straight to your college. After subtracting the costs of tuition and fees, you’ll get the remaining money to use at your discretion.

But student loan disbursement involves a lot of moving parts, and your experience might be different than someone else’s. If you’re not sure what to expect, reach out to your school’s financial aid office to point you in the right direction.

And if you borrowed private student loans, contact the bank or credit union for information on its policies. By staying up to date on your student loan disbursement schedule, you can prepare your finances before the start of the semester.