After getting approved for a student loan, there is one more step that must be completed before your funds are disbursed: the loan certification process. This step is designed to protect you as a borrower.
Keep reading to find out more about student loan certification, how long it takes, and the process for federal and private student loans.
What Is Student Loan Certification?
Student loan certification is a mandatory step before loan funds can be sent to your school. Your school will verify enrollment details, such as your expected graduation date, your year in the program, and the loan amount.
For private student loans, a Private Education Loan Applicant Self-Certification form is required. This highlights borrower-protection language, informs you of your ability to submit a Free Application for Federal Student Aid (FAFSA®), and explains how a private loan might affect your other financial aid awards. The self-certification step also provides your lender with your enrollment details and financial aid received.
Recommended: FAFSA Guide
Why Do Lenders Need Student Loan Certification?
Student loan lenders require a certification before disbursement under the Higher Education Act of 1965 and the Truth in Lending Act.
Certification ensures that the lender and your school have done their due diligence to inform you about federal financial aid options, confirm that you meet academic enrollment requirements for the loan, and disclose the difference between your school’s cost of attendance (COA) and the financial assistance you’ve received for that period.
Recommended: The Ultimate Student Loan Terminology Cheat Sheet
Do Federal and Private Student Loan Lenders Need the Same Certification?
No, the loan certification process is different for federal vs. private student loans.
For federal aid, your school is responsible for determining the type of student aid you’re eligible for, including federal student loans. If your school finds that you’re eligible for federal loans, it will record its certification of your eligibility into the Common Origination and Disbursement system. This system tracks your loan data throughout your academic career.
The loan certification process for private lenders has a different intent. Your lender can request a completed Self-Certification form from you, which includes a section for your institution to fill out. Alternatively, your lender can communicate directly with your school for its certification sign-off.
Here’s a helpful refresher on how student loans work.
What Is the Process of Student Loan Certification?
After a lender approves your loan application and you accept the loan and its terms, the student loan certification process is automatically initiated. As a student borrower, you may not need to do anything. However, make sure to follow the process, via any emails or notifications from your lender or school, to make sure everything runs smoothly and no additional information is needed from you.
Here is the process of student loan certification:
1. Lender Sends Loan Details to the School
The lender forwards your loan information to your school for certification. This includes details you’ve submitted during your application, like your personal information, enrollment information, and the loan amount requested.
2. School Reviews Loan Details
During this step, your school will certify that your enrollment details are correct, the estimated COA for the enrollment period, and how much aid you are receiving during the period.
Private student loan amounts can’t exceed a student’s COA, minus existing financial aid. If your loan details are correct and the amount is within the unfunded COA gap, the school can certify your loan with no changes.
Alternatively, the school can certify your loan with changes, either to reduce the loan amount or correct your enrollment information, if needed. It can also deny the loan certification, which might happen if it can’t verify that you’re enrolled or you already have sufficient financial aid to cover your COA.
Recommended: How To Apply for Student Loans
3. Your Lender Provides a Final Loan Disclosure
Your lender will notify you when your student loan certification is complete. At this time, it will provide you and your student loan cosigner, if applicable, with the final loan disclosure.
If your loan amount was lowered by your school, this is where you’ll see the new amount outlined in the updated disclosure agreement.
4. “Right-to-Cancel” Waiting Period
After the borrower has signed the final loan disclosure, lenders are not allowed to disburse funds right away. Federal law requires a waiting period of three business days after the lender sends you the final disclosure.
This is another layer of borrower protection that gives you time to cancel the loan, if desired, with no penalty.
5. Lender Disburses Loan Funds
After the waiting period expires, the lender can send certified student loan disbursements directly to your school, on the date requested by your institution.
How long school certification takes for a loan varies by school. Generally, it can take up to five weeks for schools to complete student loan certification, but sometimes it’s longer.
Additionally, loan certification is often done in the weeks before the start of classes. Enrollment status can change at the last minute, as when a student drops out or reduces their course load. The timing helps schools process certifications based on the most current information.
Can Student Borrowers Hurry Along the Certification Process?
It’s true that the loan certification process can be lengthy, but there’s not much that can be done to hasten it. The best that student borrowers can do is to stay on top of emails and account notifications from their lender, informing them of status updates and next steps.
What Happens if a School Doesn’t Certify That You Are a Student?
If your school doesn’t certify your enrollment status, your lender can’t legally disburse the loan funds to your school. At best, this results in payment delays as you sort things out with your financial aid office. At worst, it halts disbursement entirely, if your school can’t certify that you are, in fact, an enrolled student.
What to Do if It Is the School’s Error
If you believe a mistake has been made on your student loan certification, contact your financial aid department immediately. Find out what the school needs from you to certify your enrollment and loan.
Additionally, ask what will happen to your enrolled courses while you figure out a resolution. The last thing you want is to get dropped from your classes.
What to Do if It Is the Student’s Error
Student loan certification might be in limbo because of an oversight on your part. This can come up, for example, if you forget to enroll in classes.
If you’re in this situation, reach out to your school’s admissions and records department or your degree program’s department for guidance about what you need to do. Make sure to note that you are waiting on private student loan certification needed for disbursement.
The Takeaway
The loan certification process can feel like another hurdle to overcome in financing your education. However, it’s a step that’s meant to protect student borrowers and keep you aware of your rights.
The process and intent of certification are different for private student loans and federal student loans. If you do not get certified, don’t panic. Discuss the issue with your school to find out if the error is yours or the school’s, and take immediate steps to resolve it.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
What is the certification process for student loans?
The certification process for student loans involves the college verifying a student’s enrollment status, academic progress, and loan eligibility. The school confirms the student’s loan amount aligns with federal or institutional limits and tuition costs. Once certified, the lender disburses funds directly to the school to cover education expenses.
How long does it take to get a student loan certified?
It typically takes a few days to several weeks for a student loan to be certified, depending on the school’s processing time and the lender’s requirements. Factors such as enrollment verification, financial aid status, and the school’s workload can influence the certification timeline, potentially causing delays.
What is self-certification for a student loan?
Self-certification for a student loan is often required for private student loans to ensure borrowers understand their financial responsibility and to prevent borrowing more than necessary for educational expenses.
Photo credit: iStock/Ridofranz
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