Sallie Mae is one of the biggest providers of financial aid and student loans in the United States. The company operates as a private firm and offers many loan options for college students seeking financial assistance. Depending on the option chosen, Sallie Mae loans are either paid directly to the college or university or directly to the student.

Previously known as the Student Loan Marketing Association and more informally referred to as Sallie Mae, the company was initially set up as a government-sponsored enterprise (GSE). However, Sallie Mae was fully privatized in 2004. Now known as SLM Corporation, Sallie Mae is publicly-traded and listed on the Nasdaq under the ticker symbol SLM. 

Key Takeaways

  • Sallie Mae gives private loans to students with good credit, however, if the student's credit is lacking, a parent can cosign; these types of loans are paid directly to the school.
  • Financial aid disbursements are also paid directly to the school; the school uses the funds to cover tuition and other costs that come up during the loan approval waiting period and can give the student any remaining unused funds.
  • Certain schools will allow Sallie Mae funds to be disbursed directly to the student; the funds are first transferred to the school and then the school passes them on to the student.

Private Loans

Sallie Mae only gives private loans to students who have good credit. If a student doesn't have the necessary credit, a parent can cosign on the loan. For private loans, Sallie Mae disburses the full amount of tuition and expenses directly to the student's school.

As of 2019, Sallie Mae is the largest originator of private student loans in the United States.

Financial Aid

Financial aid disbursements are also paid directly to a student's school. The school then manages those funds by drawing them down to cover tuition costs or associated costs incurred during the loan approval waiting period. After paying all tuition and expenses, the school can disburse any leftover funds directly to the student in question.

With direct disbursement, a student is responsible for paying tuition and all other costs directly to the school; the student would also be responsible for any late fees incurred should they fail to pay on time.

Direct to Student Disbursement

There are some colleges and universities that allow Sallie Mae funds to be disbursed directly to the student. In this case, the school would receive the funds initially and then issue a check, execute an electronic transfer, pay the amount out in cash or sign over the Sallie Mae check to the student or beneficiary.

Since Sallie Mae loan checks list both the college and the student as beneficiaries, the signatures of both beneficiaries are required to release the funds in this scenario.

If Sallie Mae disburses funds directly to the school, however, the school has 14 days to apply the funds to a student's account. If a student receives the funds directly, he or she is responsible for paying all college expenses.