The US Government as a Lender
For the Direct Loan program, the US Government is the Lender. The student takes out a loan directly with the US Government. This is a secure and reliable source for loans and an efficient way of financing and administering the whole Federal loan provision. Foreign Schools, such as Aberystwyth University, originate the loans electronically on the US Government's systems.
On each disbursement date, the US Government transfers all of the requested loan funds to the School who will then disburse the funds to the students. The first disbursement will be made shortly after registration and all subsequent payments made during the course of the year. Schools report student attendance and progress directly to the US Government on their NLSDS system on a regular basis (every 2 months) and also on an ad-hoc basis as soon as any changes to the student's registration occurs.
Some private companies are contracted by the US Government to service the loans made under the Direct Loan program.