Discover How Student Loan Origination Fees Work

"The nation's college financial aid officers are once again calling for the elimination of origination fees, often referred to as a hidden tax on federal student loans. Origination fees – the cost the government collects when a student loan is issued – don't receive a lot of attention in the national conversation on student debt," according to U.S. News & World Report

"Many borrowers might not even realize their federal student loan has this fee, unless they read the fine print of their promissory note. That's because the government deducts the origination fee before disbursing the loan directly to the school to cover tuition and fees.

Federal student loan borrowers are responsible for repaying the entire amount of their loan plus interest, including the origination fee. For most undergraduates, the fee doesn't impose much of a burden.

According to a recent National Association of Student Financial Aid Administrators issue brief, an undergraduate borrower who took out the average amount of federal student loans for the past four years and repays them over the next 10 years will pay an additional $235 in fees and associated interest. That amount rises to $338 if the loan repayment term stretches to 25 years.

For parents and graduate students, though, the origination fee is more costly, which we'll take a closer look at below."

NASFAA's "Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.

 

Publication Date: 11/30/2017

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