How does Sallie Mae disburse funds?

Sallie Mae (officially the SLM Corporation (SLM)) is the number one provider of financial aid and student loans in the United States, servicing over 25 million students. The privately held company and disburses funds to its students in a variety of ways.

Sallie Mae often disperses financial aid directly into a student's school account. The educational institution uses the funds to pay for tuition or other costs that build up over the loan approval waiting period; they normally have 14 days to apply the money to a student's account. If there are leftover funds, the student can have the school disburse those funds directly to him or save them for future costs.

There are some colleges that have Sallie Mae disburse the funds directly to the student. If a school allows for direct disbursement, it can issue a check, send the funds as an electronic transfer, pay out the loan amount in cash or sign over the check directly to the student. Under these circumstances, both the student and the school are listed as the co-beneficiaries, meaning that both a school official and the student need to sign to have the funds released directly.

Sallie Mae loans, which are private loans, are granted to applicants who have good credit. Most of the time, though, the loans are actually granted to the student's parents, instead of, or in addition to, the student. The parents are considered co-borrowers, and could be liable for repayments. This does not affect how the loan funds are disbursed, however.