Common Questions on Loan Fees

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A loan origination fee is charged by the government to the student or parent borrower to compensate for the cost of processing and lending loan funds.

The federal government uses the origination fee to defray the cost of managing and lending loans to students (Direct Stafford loans) or parents (Direct PLUS loans).

Mid-year changes to Direct Lending Origination Fees

ALERT: Due to the ongoing implementation of Congress' Budget Control Act (BCA) of 2011, which put into place the "sequester" (automatic across-the-board federal budget cuts). The sequester mandates that the origination fees are increased as follows for Direct Stafford Loans.

The increased origination fee applies to Direct Stafford Loans whose 1st loan disbursement is made on or after December 1, 2013. Fees vary by loan type. The increased origination fees effective December 1, 2013 are:

  1. Direct Stafford Student Loans: 1.072% fee
    • This loan origination fee of 1.072% is deducted from the Direct Stafford loan funds at the time of each disbursement.
    • For loans first disbursed from July 1, 2013 to November 30, 2013, the origination fee is 1.051%.
  2. Direct Parent PLUS or Grad PLUS Loans: 4.288% fee
    • This loan origination fee of 4.288% is deducted from the Direct PLUS loan funds at the time of each disbursement.
    • For loans first disbursed from July 1, 2013 to November 30, 2013, the origination fee is 4.204%.

The federal government automatically deducts these fees from the loan amount at the point of each loan disbursement.

Please take these examples into account when determining how much you would like to borrow to cover expenses for the school year.

The following examples for each loan type use the Loan Origination Fee Percentage for December 1, 2013 or later:

  1. Direct Stafford Student Loan Example: Annual loan for $3,500 split over two terms ($1,750 per term).
    $1,750 Loan principal amount for the term (amount to be repaid)
    - 18 1.072% loan origination fee (no rounding; truncate cents)
    $1,732 Actual term disbursement credited to the student’s account

    Student loans have annual loan limits; however, if you want you can reduce the annual amount borrowed from the standard amount offered on your financial aid eAward.

  2. Direct PLUS Loan Example: Annual loan for $10,000 split over two terms ($5,000 per term).
    $5,000 Loan principal amount for the term (amount to be repaid)
    - 214 4.288% loan origination fee (no rounding; truncate cents)
    $4,786 Actual term disbursement credited to the student’s account

    Calculating your PLUS Loan: You can reduce the amount you borrow from the amount offered on your Cedarville Parent PLUS authorization or Grad PLUS authorization.

The payment plan options already take into account the anticipated fees related to the loan(s) you have accepted as part of your payment plan.

Provided by Cedarville University – Financial Aid Office (updated 2012-07-01)