A Borrower’s Guide to Student Loan CertificationJune 8, 2023
After successfully securing a student loan, one crucial step must be completed before your funds can be disbursed: the student loan certification process. This necessary process is designed to safeguard and protect you as a borrower, ensuring transparency and compliance with regulations.
In ELFI’s comprehensive guide, we will explore the intricacies of student loan certification, including its duration and the distinct procedures involved for both federal and private student loans. Join us as we demystify this vital stage in your student loan journey and equip you with the knowledge to navigate it confidently, knowing that your rights and interests are well-protected.
What Is Student Loan Certification?
Obtaining student loan certification is a mandatory step for borrowers and must be completed before your school receives your student loan funds. During student loan certification, your school may be asked to verify the following enrollment details:
- Your Expected Graduation Date
- Your Year in the Program
- Your Loan Amount
- Satisfactory Academic Progress (SAP)
In the case of private student loans, a Private Education Loan Applicant Self-Certification form becomes necessary. This form includes borrower-protection language, outlines the option to submit a FAFSA (Free Application for Federal Student Aid), and clarifies how obtaining a private loan may impact your other financial aid awards. The self-certification step serves as a means for your lender to gather pertinent information about your enrollment status and the financial assistance you have received. By completing this step, you ensure that your lender is equipped with accurate details to proceed with the loan disbursement process.
Why Do Lenders Need Student Loan Certification?
Student loan lenders are legally obligated to secure student loan certification before funds disbursement. This is required by law, as stipulated in the Higher Education Act of 1965 and the Truth in Lending Act.
Student loan certification is vital in ensuring that both the lender and your educational institution have diligently fulfilled their responsibilities. This form serves as a mechanism to inform you about the various federal financial aid options available (FAFSA), validate your eligibility based on academic enrollment requirements, and provide transparent disclosure regarding the disparity between your school’s cost of attendance (COA) and the financial assistance you have received for the specific period.
By adhering to these certification requirements, lenders aim to safeguard your interests, promote transparency, and maintain compliance with legal obligations.
Does the Same Certification Apply to Both Federal and Private Student Loan Lenders?
No, the certification process varies for federal and private student loans.
When it comes to federal aid, your school assumes the responsibility of assessing your eligibility for different types of student aid, including federal student loans. If your school determines that you qualify for federal loans, it will record the certification of your eligibility in the Common Origination and Disbursement system. The Common Origination and Disbursement system is a system that effectively tracks your loan data throughout your academic journey.
In contrast, private student loan lenders follow a distinct certification process. They may require you to complete a Self-Certification form, which includes a section for your institution to complete. In some cases, your private student loan lender may communicate with your school directly to obtain the certification sign-off.
Understanding how student loans work can provide a helpful refresher on navigating the intricacies of the certification process.
What Is the Student Loan Certification Process?
Once your loan application is approved and you accept the loan terms, the student loan certification process is set in motion. As a student borrower, you may not need to take any action. However, it’s crucial to stay informed and follow any communication from your lender or school to ensure a smooth process and address any additional requirements, if necessary.
1. Lender Submits Loan Details to the School
Your lender will forward the loan information you provided during the student loan application process to your school for certification. This includes your personal information, enrollment details, and the requested loan amount.
2. School Reviews and Certifies Loan Details
During this stage, your school carefully reviews the loan details to ensure accuracy. This includes verifying your enrollment information, estimating the cost of attendance (COA) for the designated period, and determining the amount of aid you will receive.
For private student loans, the loan amount cannot exceed the COA minus any existing financial aid. If your loan details are accurate and fall within the remaining COA gap, the school can certify the loan without any changes.
Alternatively, the school may make changes to the loan, such as reducing the amount or correcting enrollment information, if necessary. In some cases, the loan certification may be denied if the school is unable to verify your enrollment status or if you already have sufficient financial aid to cover your COA.
3. Final Loan Disclosure from Your Lender Provided
Once your student loan certification is complete, your lender will notify you and, if applicable, your student loan cosigner. At this stage, you will receive the final loan disclosure, which provides comprehensive details about the loan.
If the school adjusted your loan amount, the updated disclosure agreement will reflect the new amount.
4. “Right-to-Cancel” Waiting Period
After you sign the final loan disclosure, federal regulations require a mandatory waiting period of three business days before the lender can disburse the funds. This waiting period offers an additional layer of protection, allowing you to cancel the loan without penalty if you change your mind.
5. Disbursement of Loan Funds by the Lender
Once the waiting period concludes, the lender can send the certified student loan disbursements directly to your school on the requested date.
The duration of the school certification process may vary, typically taking up to five weeks, but occasionally longer. It is common for loan certifications to occur in the weeks leading up to the start of classes to ensure the most up-to-date enrollment information is considered, as changes in enrollment status can occur closer to the start of the academic term, such as students dropping out or adjusting their course load.
Is There Anything Borrowers Can Do to Speed Up the Student Loan Certification Process?
While the student loan certification process may take some time, there are steps student borrowers can take to speed up the process.
Although it’s challenging, being proactive can help streamline the journey. It is recommended for student borrowers to closely monitor emails and account notifications from their lender, as these will provide valuable updates on the status of the certification and any subsequent actions required. By staying informed and promptly responding to requests or inquiries, borrowers can contribute to a smoother and more efficient student loan certification process.
What Happens if a School Doesn’t Certify That You Are a Student?
When your school fails to certify your enrollment status, it has implications for the disbursement of loan funds. Legally, your lender is unable to disburse the loan funds to your school without the proper certification. As a result, this can lead to payment delays as you navigate the situation with your school’s financial aid office. In more severe cases, disbursement may be entirely halted if your school cannot certify your enrollment as an enrolled student. It is crucial to address this issue promptly to ensure a smooth loan disbursement process.
What to Do if it is the School’s Error
If you believe there has been an error in your student loan certification process caused by the school, it is crucial to promptly contact your financial aid department. Contact them to discuss the issue and gather information on the specific documentation or requirements needed to certify your enrollment and loan.
Additionally, it is important to inquire about the impact on your enrolled courses while you work towards resolving the situation. Ensuring that you remain enrolled in your classes is essential, so communicate your concerns to prevent any potential course disruptions.
What to Do if it is the Student’s Error
If the student loan certification process has encountered obstacles due to an oversight on your part, it is crucial to take immediate action to rectify the situation. This could arise, for instance, if you forgot to enroll in classes or overlooked a required step.
In such cases, it is advisable to reach out to your school’s admissions and records department or the department responsible for your degree program. Seek their guidance on the necessary actions you need to take to resolve the issue. Make sure to clearly communicate that you are awaiting private student loan certification required for loan disbursement. Taking proactive steps and keeping the relevant departments informed will help expedite the resolution process.
Navigating the student loan certification process may seem like an additional challenge when it comes to financing your education. However, it is a crucial safeguard for student borrowers, ensuring you remain informed about your rights and protected throughout the loan process.
Remember, the certification process differs for private and federal student loans. In the event that your certification is not granted, there is no need to panic. Engage in open communication with your school to determine whether the error lies with you or the institution and take prompt action to address it.
If you need additional funds to cover your educational expenses after exhausting other financial aid options, ELFI offers private student loan solutions. Our private student loans allow eligible borrowers to borrow up to their school’s cost of attendance, and we don’t charge any fees. Take just a few minutes to check your interest rate online and explore the possibilities of an ELFI private student loan today.