Origination Fees

Undergraduate Origination Fees

Name of LoanOrigination FeeActual Disbursement of $1,000 Loan
Stafford – Subsidized1.066%$989.34
Stafford – Unsubsidized1.066%$989.34
Perkins0%$1,000.00
Parent PLUS4.264%$957.36
Private*0%$1,000.00

*Many private loans have 0% origination fees

graduate Origination Fees

Name of LoanOrigination FeeActual Disbursement of $1,000 Loan
Stafford – Unsubsidized1.066%$989.34
Perkins0%$1,000.00
Direct PLUS4.264%$957.36
Private*0%$1,000.00

*Many private loans have 0% origination fees

What is an Origination Fee?

An origination fee is what a lender charges for processing a loan. Essentially it is what a lender takes immediately for getting paperwork and infrastructure to distribute the loan. Many student loans have origination fees and they can be significant depending on the type of student loan. Private student loans often have no origination fees, while federal student loans usually do.

For Example:

Scott takes out a $1,000 Stafford Unsubsidized loan. The origination fee on this loan is 1.066%. This means that Scott does not receive 1.066% of the loan but he still owes a full $1,000. Origination fees are subtracted from the amount distributed.

$1,000

x 0.01066

10.66

$1,000

– 10.66

$989.34

 

 

Scott took out a loan for $1,000 and that amount is what interest is calculated from, but he only received $989.34 because of the origination fee. Many federal loans with the notable exception of Perkins loans charge origination fees. They can be significant in the case of PLUS loans, or relatively small in the case of Stafford loans.

Origination fees are important because if they are not taken into account then a student may be surprised when he or she receives less than what was initially expected. This is why LoanMajor’s calculators takes into account origination fees when estimating your funding so that you do not underfund your education.