Authorizing Loan Disbursements for Power-of-Attorney-Endorsed MPNs

The Master Promissory Notes for Federal Stafford and Federal PLUS loans include language allowing the borrower to authorize the delivery of loan funds by Electronic Funds Transfer or master check. In cases in which the promissory note is endorsed using a power of attorney, however, its EFT/master-check authorization is not valid.

In order to deliver funds by EFT or master check in these cases, the school must obtain a separate authorization from the borrower that allows loan funds to be disbursed through one of these means. The signature of the person holding the power of attorney is not acceptable for this authorization.

Because there is no common EFT or master-check-authorization form that is separate from the MPN, financial-aid administrators must create their own forms and are encouraged to consult with campus's legal staff in doing so. In addition, the financial-aid office must keep a copy of the borrower's signed EFT/master-check-authorization form for audit purposes.

The Common Manual, section 6.16, offers schools additional guidance about obtaining disbursement authorizations. You will need Adobe Acrobat Reader to view the Common Manual policy.

If you have additional questions about loan-disbursement authorizations, please contact USA Funds^®' policy department.