What is Student Loan Origination Fee? What You Need to Know
Getting to know your student loan origination fee isn’t a bad idea at all. In fact, it is part of some of the numerous questions most borrowers ask whenever they want to apply for a student loan. So let’s get to the details that should help!
What is Student Loan Origination Fee?
A student loan origination fee is a cost a borrower might be charged when they first originate or take out a student loan. Typically, a student loan origination fee is added to cover the administrative costs of processing and funding the loan.
Not all student loans have origination fees, but every federal student loan does. Students will face an origination fee, called a loan fee, every time they borrow through the Federal Direct Loan program.
Whether private lenders charge an origination fee can vary, but this fee is less common on private student loans. None of the lenders among our picks for the best private student loans, for example, lists an origination fee.
Federal Student Loan Origination Fee and Interest Rates 2023
Interest rates are amounts charged to a borrower for the privilege of using the lender’s money. The interest is calculated as a percentage of the principal balance of the loan.
While origination fees are fees assessed by lenders to help offset the cost of processing the loan. The origination fee is assessed on each loan disbursement.
Origination Fee
Most federal student loans have loan fees that are a percentage of the total loan amount. The loan fee is deducted proportionately from each loan disbursement you receive while enrolled in school.
This means the money you receive will be less than the amount you actually borrow. You’re responsible for repaying the entire amount you borrowed and not just the amount you received.
| Loan Type | First Disbursement Date | Loan Fee |
|---|---|---|
| Direct Subsidized Loans and Direct Unsubsidized Loans | On or after 10/1/19 and before 10/1/20 | 1.059% |
| On or after 10/1/18 and before 10/1/19 | 1.062% | |
| Direct PLUS Loans | On or after 10/1/19 and before 10/1/20 | 4.236% |
| On or after 10/1/18 and before 10/1/19 | 4.248% |
Interest Rate
The interest rate varies depending on the loan type and (for most types of federal student loans) the first disbursement date of the loan.
The table below provides interest rates for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans first disbursed on or after July 1, 2022, and before July 1, 2023.
| Interest Rates for Direct Loans First Disbursed | ||
|---|---|---|
| Loan Type | Borrower Type | Fixed Interest Rate |
| Direct Subsidized Loans and Direct Unsubsidized Loans | Undergraduate | 4.53% |
| Direct Unsubsidized Loans | Graduate or Professional | 6.08% |
| Direct PLUS Loans | Parents and Graduate or Professional Students | 7.08% |
Read Also:
- Wells Fargo Stimulus Check
- Wells Fargo Personal Line Of Credit
- Wells Fargo student loans
- Wells Fargo Propel American Express® Card
- How to Check If You’re Pre-qualified for a Wells Fargo Credit Card
Other Federal Student Loan Origination Fee and Interest Rate
The following table provides interest rates for Direct Loans and Federal Family Education Loan (FFEL) Program loans first disbursed on or after July 1, 2022, and before July 1, 2023.
Perkins Loans (regardless of the first disbursement date) have a fixed interest rate of 5%.
| Loan Type | Borrower Type | First Disbursement Date | Fixed Interest Rate |
|---|---|---|---|
Direct Subsidized Loans Subsidized Federal Stafford Loans | Undergraduate | 7/1/18–6/30/19 | 5.05% |
| 7/1/17–6/30/18 | 4.45% | ||
| 7/1/16–6/30/17 | 3.76% | ||
| 7/1/15–6/30/16 | 4.29% | ||
| 7/1/14–6/30/15 | 4.66% | ||
| 7/1/13–6/30/14 | 3.86% | ||
| 7/1/11–6/30/13 | 3.4% | ||
| 7/1/10–6/30/11 | 4.5% | ||
| 7/1/09–6/30/10 | 5.6% | ||
| 7/1/08–6/30/09 | 6.0% | ||
| 7/1/06–6/30/08 | 6.8% | ||
Direct Subsidized Loans
Subsidized Federal Stafford Loans | Graduate or Professional | 7/1/06–6/30/12 | 6.8% |
|
Direct Unsubsidized Loans Unsubsidized Federal Stafford Loans | Undergraduate | 7/1/18–6/30/19 | 5.05% |
| 7/1/17–6/30/18 | 4.45% | ||
| 7/1/16–6/30/17 | 3.76% | ||
| 7/1/15–6/30/16 | 4.29% | ||
| 7/1/14–6/30/15 | 4.66% | ||
| 7/1/13–6/30/14 | 3.86% | ||
| 7/1/06–6/30/13 | 6.8% | ||
|
Direct Unsubsidized Loans Unsubsidized Federal Stafford Loans | Graduate or Professional | 7/1/18–6/30/19 | 6.6% |
| 7/1/17–6/30/18 | 6% | ||
| 7/1/16–6/30/17 | 5.31% | ||
| 7/1/15–6/30/16 | 5.84% | ||
| 7/1/14–6/30/15 | 6.21% | ||
| 7/1/13–6/30/14 | 5.41% | ||
| 7/1/06–6/30/13 | 6.8% | ||
Direct PLUS Loans
| Parents and Graduate or Professional | 7/1/18–6/30/19 | 7.6% |
| 7/1/17–6/30/18 | 7% | ||
| 7/1/16–6/30/17 | 6.31% | ||
| 7/1/15–6/30/16 | 6.84% | ||
| 7/1/14–6/30/15 | 7.21% | ||
| 7/1/13–6/30/14 | 6.41% | ||
| 7/1/06–6/30/13 | 7.9% | ||
|
Direct Unsubsidized Loans Unsubsidized Federal Stafford Loans | Parents and Graduate or Professional | 7/1/06–6/30/10 | 8.5% |
Read Also:
- Private Student Loans and Method of Application
- Prosper Personal Loans Updates
- Nelnet Student Loan
- Scholarships for Low-Income Students
- Getting the Best Student Loans Without a Cosigner
The Bottom Line
Knowing what loan fees will cost you can be complicated, but if you leave school with a typical professional degree balance, you probably will get charged a new car’s worth. Very few institutions warn you adequately about this.
In rare cases, it can make sense to take out private loans instead of Grad PLUS. Private loans usually have lower student loan origination fees and lower interest rates than PLUS loans.
However, you should never borrow anything but federal loans even at higher rates if your plan is to utilize income-driven repayment.
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