NASFAA Mention: How Student Loan Fees Work and What They Cost

"Tammy Trevino wasn’t sure whether to borrow a federal student loan or a private student loan for her daughter’s education. Then she learned federal loans come with an origination fee that private loans typically don’t," USA Today reports.

"'I was surprised,' says Trevino, 52, from Victoria, Texas. 'My assumption was [federal loans] would be the best, easiest option for school.'

Federal loans typically are that best, easiest option, and fees have minimal effect on these loans for undergraduates. But parents, like Trevino, as well as graduate students – who typically borrow larger amounts at higher interest rates – pay much more.

The federal government has charged about $8.3 billion in origination fees since 2013, according to the National Association of Student Financial Aid Administrators, with almost one-third coming from parent borrowers.

Here’s what borrowers should know about these fees.

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All federal student loans have origination fees, and schools don’t have the ability to waive these costs.

Justin Draeger, president and CEO of NASFAA, says parents and families really can’t do anything about these fees 'except to realize upfront that the amount they’re [borrowing] won’t be the same amount they receive.'

But private student loans are a potential alternative. Most private loans don’t charge origination fees and may offer lower interest rates than federal loans, depending on your financial situation."

NASFAA's "Notable Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Articles included under the notable headlines section are not written by NASFAA, but rather by external sources. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.

 

Publication Date: 8/28/2019

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