Verified answer

When you are awarded (not "rewarded"), a federal student loan, there is an origination fee of just over 1 %. This is deducted from the loan before the school receives the money, so only about 99% of the loan is sent to the school to pay your expenses. For example, say you are awarded a loan for $3,500. That is the gross amount of the loan. After the 1% origination fee is deducted, the school will receive the remaining 99%, or roughly $3465. The amount that the school gets is called the net amount. Although you will repay the entire gross amount ($3,500), only the net amount ($3465) will be used to pay for your tuition and other expenses.

A disbursement is a portion of a loan (or grant) that is applied to your expenses. Usually federal financial aid has to be paid out in at least 2 disbursements, so most schools will disburse a portion of your loan each term. For example, if your school has a fall and a spring semester, they will disburse 1/2 of your loan for the fall and the other half for the spring.

In the example above, the amount that was awarded is $3,500 and the net amount would be $3465. If the school has two terms, the net amount of each disbursement would be $1732.50 ($3465 / 2)