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Education Loan Disbursement Process
Education Loan

Education Loan Disbursement Process

Education Loan Disbursement Process

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Explore guide on education loan disbursement in India, detailing the step-by-step process, types of disbursements, eligibility criteria, & tips to overcome challenges.

GyanDhan
Dipali Negi
Updated on:  29 Apr 2025 | 4.43K | 19  min read

“What is disbursed amount in loan?”. The answer to this question, when first heard, will make your head spin. Yet, we won’t let that happen because we have disclosed everything that a bank would not disclose. Everything starts when you start exploring the lenders for your education loan.

 

Well, the sanctioned letter and the amount written on it are an official declaration that informs the amount of funds the lender is going to provide for the next 2-3 years for your education. However, the sanction and disbursed amount are always different from the disbursement of education loan. Because the amount is disbursed based on the semester fee, thus, the sanction amount is fully consumed in the last year of the university or college. Let’s learn about this concept in more detail. 

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What is the Disbursed Amount in Loan?

The disbursed amount of the loan is the amount that the lender transferred to the university as your tuition fee and some additional expenses, such as housing, books, travel, and other costs that a student requires to support their studies abroad.

 

Therefore, when a student is relying on an education loan, they need to ensure that they will get the resources they need to settle and sustain their living abroad. Therefore, when you receive the sanction letter and get the approval for your visa. Confirm the dates with the lender on the first disbursement.

 

Many banks, such as Prodigy, disburse the amount when you acknowledge the terms and conditions within the new network. Many other lenders, such as ICICI Bank, BOB, and Yes Bank, transfer the first semester tuition fee when you accept and sign the loan agreement. Thus, your loan application form and the Letter of Acceptance decide the whole disbursement process of the loan amount. 

 

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Types of Disbursement in Education Loan

Here are the different types of disbursement in education loans - 

Direct Disbursement to Student:

The full loan amount is disbursed to the student in one installment when this kind of disbursement occurs. With this approach, the student has the freedom to manage and distribute money for living expenses, books, supplies, room & board, and tuition as needed. Usually, a cheque or a direct transfer into the student's bank account is used for direct student disbursement. Although it necessitates cautious financial management, this strategy is advantageous for students who have the self-control to plan their costs throughout their academic careers.

Segmented Disbursement:

With this kind of disbursement, the loan amount is divided into discrete portions. The student receives the component for living expenses, while the portion for tuition is paid directly to the educational institution. This approach reduces the possibility of student misallocation by guaranteeing that necessary expenses like tuition are paid immediately. It gives students the freedom to budget their daily living expenses while also providing the guarantee that tuition and other fees are paid in full.

Partial Disbursement:

When a loan is partially disbursed, it is released in installments or stages, usually in accordance with the academic calendar, for example, at the start of each semester or year. This can be used for both living expenses that are reimbursed to the student and tuition fees that are paid straight to the school. The student will have access to the money they need for their education without having to take home a large lump sum all at once thanks to this phased method, which helps to match the release of funds with the real needs as they arise.

 

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Is Direct Disbursement Possible?

When it comes to school loans from Indian banks, direct student disbursement is feasible if the loan is meant to pay for living expenses, books, travel, and other miscellaneous charges in addition to tuition fees. When a student is studying overseas or when the college does not handle all of the student expenses directly, this approach is frequently utilized. When banks have evaluated the creditworthiness and money management abilities of the student or guarantor, they may decide to pay out directly. Direct distribution may also be taken into consideration for part-time or vocational courses in which tuition is not the main cost.

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Role of Co-applicants and Guarantors

Co-applicants and guarantors play a major role when you are withdrawing an unsecured education loan. Their financial capacity can influence both the approval and the disbursement of education loan speed.

Responsibilities of Co-applicants and Guarantors:

A co-applicant (either parent, guardian, or sibling), alongside the primary applicant. They share the responsibility of loan repayment and act as a security. A guarantor, on the other hand, agrees to repay the loan if the borrower and co-applicant fail to do so.

 

For both co-applicants and guarantors, the following are important:

 

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    Stable Income: A fixed income from a verified source of income reassures the lender about repayment capability.
 
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    Good Credit Score: A strong credit history indicates financial discipline and increases the chances of loan approval.
 
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    Financial Stability: Having minimal existing financial obligations and helping with fast approvals.

Impact on Disbursement:

If your financial profile does not meet the lender's criteria, then the co-applicant's profile is being considered for securing an education loan. Their stable income helps the lender to mitigate the risk of default. A strong financial profile of the co-applicant also helps in the quick approval of your loan. 

 

In short, choosing a financially strong co-applicant or guarantor is not just a formality; it's a necessity that directly impacts the ease and success of your education loan journey.

 

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Eligibility for an Education Loan Disbursement

Getting an education loan sanction letter is the primary eligibility requirement for your education loan disbursement. However, there have been rejections even after obtaining a sanction letter mostly due to documentation issues. Make sure you submit the documents correctly for a timely disbursement of your education loan. Here are the general eligibility criteria for education loan disbursement:

 

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    Get admission to a recognized university.
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    Provide valid documents timely.
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    Co-applicant must have a high CIBIL score.
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    Provide your institution’s confirmation for disbursement.
 
Education Loan Disbursement Process
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Education Loan Disbursement Process

An education loan's disbursement is a well-planned procedure intended to guarantee a seamless transfer of cash from the lender to the borrower. Understanding this procedure can help borrowers budget for and manage their education more effectively, resulting in a more predictable and seamless path to reaching their academic goals.

In How Many Days Education Loan is Sanctioned?

Getting an education loan sanctioned is important, while you are planning for your higher education. The time taken for loan approval can vary based on the lender, the type of loan (secured or unsecured), and on your documents. Generally, public banks may take a little longer as compared to private banks and NBFCs.

Bank/NBFC Name Time to Sanction (Approx.) Last Step Before Disbursement Disbursement Time (Post Sanction)

State Bank of India

12–15 working days

Document verification and loan agreement

3–5 working days

Credila

5–7 working days

Loan agreement signing

2–3 working days

Axis Bank

7–10 working days

Submission of collateral and agreement

3–4 working days

ICICI Bank

5–8 working days

Final approval and agreement

2–3 working days

Avanse Financial

3–5 working days

E-sign of agreement

1–2 working days

InCred

4–6 working days

Final offer acceptance

2–3 working days

IDFC FIRST Bank

5–7 working days

KYC and agreement sign

2–4 working days

Loan Sanction and Disbursement Letter:

The loan sanction and education loan disbursement letter is the first document to be issued upon approval of an education loan. This document, which includes information on the authorized loan amount, terms of disbursement, and the payment schedule, acts as an official confirmation from the lender. It is necessary that the borrower carefully reads this letter, since it establishes the parameters for the subsequent financial transactions and describes how the loan will be disbursed, either directly to the educational institution or into the borrower's account.

Tuition Fee Disbursement:

A crucial step in the loan disbursement procedure is the payment of the borrower's tuition fees, which guarantees that the educational institution is compensated for their costs. Funds may be disbursed into the borrower's account for additional payment or paid straight to the institution, depending on the terms of the loan arrangement between the borrower and the lender. By guaranteeing that tuition payments are made on time, this direct payment method protects the loan's main objective and ensures the student's enrollment and continuous education.

Living Expense Disbursement:

The living expenditure reimbursement program takes care of the borrower's ongoing financial needs as they pursue their education, particularly for international students. Funds can be transferred directly to the student's account by lenders or made available through prepaid FOREX cards. These grants are meant to help students with living expenditures such as housing, food, transportation, and other living costs, giving them the financial freedom to concentrate on their academics without having to worry about money problems. Ensuring that students can afford their living expenses during their academic program requires careful handling of these monies.

 

Key Documents Required for Education Loan Disbursement

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Documents Required for Education Loan Disbursement

To request an education loan disbursement letter, you must submit the below-mentioned documents. These documents help the bank verify your request and ensure the loan amount is disbursed accurately and on time.

 

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    Loan Agreement: You must have a signed loan agreement with banks that talks about the terms of the loan.
 
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    Sanction Letter: You must have the sanctioned letter issued by the bank.
 
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    Admission Proof: You should have proof of admission such as an offer letter or admission confirmation.
 
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    KYD Documents: KYC documents include Aadhaar, PAN, passport, and photographs.
 
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    Income Proof: Lenders require you to submit proof of income that may include salary slips, ITR, or financial statements of the co-applicant.
 
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    Collateral Documents: If you have secured a loan with collateral, then you would have to submit the collateral document.
 
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    Fee Structure: You must submit the official documents of the university demonstrating the fee structure.
 
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    Disbursement Request Form: Some banks may require you to fill out a specific education loan disbursement letter.
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Difference in Public Bank's and NBFC Disbursement

Public banks and NBFCs have different methods for disbursing education loans, and each has its own procedure. A comparison illustrating these variations can be found below.

Basis of Difference Public Banks NBFCs

Disbursement letter

Usually required, detailing disbursement terms and conditions.

Not always mandatory, often offering more flexibility.

Tuition fee disbursement

Funds are often sent directly to educational institutions or disbursed via specific instruments like FOREX cards.

Generally offer direct disbursement to the student's account or the institution, based on preference.

Living expenses

Funds for living expenses are usually transferred to a FOREX card or the student's account, facilitating overseas spending.

Direct disbursement to the student's account is common, providing immediate access to funds for living expenses.

Processing time

Tends to be longer due to extensive documentation and procedural requirements.

Usually quicker, thanks to streamlined processes and fewer bureaucratic hurdles.

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What is a Disbursement Schedule? 

The payout schedule is a set timetable that specifies how and when the money from the education loan will be disbursed. This timetable is essential for financial planning since it tells the borrower when funds will be available for living expenses and tuition. The academic calendar, the lender's processing delays, and certain payment deadlines established by educational institutions are some of the factors that affect the schedule. Borrowers can avoid any disruptions in their education caused by financial inadequacies by making sure their financial needs and academic requirements are in line by having a clear understanding of the payment plan.

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Common Challenges in the Loan Disbursement

There are many obstacles to overcome when navigating the education loan disbursement process, which could prevent the money from transferring smoothly. In order to overcome these obstacles and make sure that financial concerns do not interfere with academic endeavors, awareness and preparedness are essential.

 

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    Errors in the documentation: Incomplete or inaccurate documentation may cause a delay in payment. Hence, before submitting, double-check that all paperwork is accurate.
 
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    Communication gaps: When borrowers and lenders or educational institutions don't understand each other, it might make the disbursement process more difficult. However, you should keep the lines of communication open and ask questions when you need clarification.
 
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    Timing of disbursements: Failure to comply with the academic calendar may result in financial hardship. In order to align disbursement dates, talk to your lender about your institution's payment deadlines.
 
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    Misinterpretation of policy: Lender terms or policies can give rise to unforeseen problems. Hence, it is required for you to go over your loan agreement carefully, and ask your lender if you have any questions.
 
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    Foreign exchange complications: It might be difficult for students studying abroad to keep track of currency exchange rates and FOREX card restrictions. Thus, it is advisable to recognize the conditions of using FOREX cards and budget ahead of time for money needs.
 

Also Read:

 

In conclusion, managing the funds associated with your student loan may appear difficult, but it becomes simpler with some assistance. We have discussed the loan approval process and how the funds are disbursed to you or your educational institution. It makes it easier to know what is disbursed amount in loan and how much of the loan will be released. GyanDhan is available to assist you if you need it or have any questions. They are able to assist you with any loan issues. You only need to use GyanDhan to check your eligibility, and you'll be all set. You're not alone in figuring out your loan and realizing your academic goals when you use GyanDhan.

 

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Frequently Asked Questions

What are the different ways a loan can be disbursed?
 

Loans can be paid back in a number of ways, such as credit card advances, wire transfers for larger or overseas transactions, issuing checks, and direct deposit into your bank account. Other ways include sending money straight to schools for student loans or into an escrow account for certain costs like mortgages.

Does loan disbursement mean I have received a refund?
 

The act of a lender releasing borrowed cash to the borrower or directly for a particular purpose, such as paying for a mortgage or tuition, is referred to as disbursement. When an overpayment is made and the extra amount is reimbursed to the payer, this is known as a refund disbursement.

What is disbursed amount in loan?
 

The actual payment or release of funds from a lender to a borrower is referred to as the "dispersed amount" in a loan. It's the point at which the borrowed funds are made accessible to the borrower—either all at once or in installments—for the planned use, such as paying for a home, an education, or other predetermined costs.

How does loan disbursement differ from loan approval?
 

There are two different phases in the lending process: loan approval and loan disbursement. While disbursement is the actual transfer of approved cash to the borrower or for the borrower's use, approval is the first stage in which the lender verifies the applicant meets the requirements for a loan.

How do student loan disbursements work?
 

Student loan disbursements are made directly to the university to cover tuition fees, and sometimes to the student for living expenses. Disbursement occurs once the loan agreement is signed and all required documents are been submitted.

What is a disbursement letter education loan?
 

A disbursement letter is an official document issued by the bank at the request of the borrower that mentions the loan amount and schedule of the payments to be made to the university.

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