I know, I know. My last post harped on not borrowing money. But that was really about not borrowing more than you need. It's inevitable that you may need to take out a student loan. This is a reminder that things have changed from past years.
If you have a loan through Direct Lending, please disregard this post. It is only for students going through the Federal Family Education Loan Program (FFELP) who use a bank as a lender.
Your school may have assigned a lender to you in the past. If you got a loan last year, you've already signed a Master Promissory Note (MPN) with that particular lender. The MPN is supposed to be good for the entire time you're at the same college. If you've read my other posts, you'll remember that federal subsidy cuts (thanks Congress) led many lenders to rapidly exit the student loan industry. On top of that, New York Attorney General Cuomo launched a huge investigation against financial aid offices. The outcome was that schools cannot assign a lender and can only have a preferred lender list under very specific guidelines. And in no way can any college recommend a private alternative lender.
What does this mean for you? Your student loan may be in limbo for the new year. In the past, our office assigned lenders (the best) to students and used the same lender from year to year. This year, so many lenders have dropped out that most students have to choose a new bank. Instead of us assigning a lender, students have to access their personal college web site to choose a new lender. While we've advertised the change heavily, we had a large number of students not get their refunds on time because they hadn't chosen a lender for us to process their loan. Even after they select a new lender, students don't realize they have to sign a new MPN with the new lender.
In addition, returning students were accustomed to getting 100% of their loan funds. With the subsidy cuts, many lenders are now back to charging a processing fee anywhere from 1% to 4%. We're also getting calls from students wondering why their loan disbursements are less than what was listed on their award letter. By law, the lender has to disclose the charges on the student's Notice of Guarantee, but it's usually overlooked by students.
My point is that if you have not received your loan funds (yet) as expected, don't assume everything is okay. I realize that online courses have varying start/finish times, but financial aid is based on an academic year. At some point, that new academic year begins. Contact your Financial Aid Office to see if anything needs to be completed on your part. Another example using my office is that when we assigned lenders, we used companies that were electronic. We are now receiving some applications that must be completed by paper. That takes longer. If you have financial aid pending, even federal and/or state aid, don't hesitate to contact your financial aid office.
Have a safe and happy Labor Day!