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 (Federal Stafford loans) or parents (Federal PLUS loans).

Fees vary by loan type. The origination fees for 2011-12 are:

1. Direct Stafford Student Loans (Stafford hereafter): 0.5% net fee
   • 1.0% origination fee less the up-front 0.5% rebate
   • A loan origination fee of 1.0% is deducted from the Stafford loan funds at the time of disbursement. However, 0.5% of this fee is immediately refunded back to the student borrower in the form of an interest rebate. The net-cost is therefore 0.5%.
   • Note: To keep the interest rebate, you must make your first twelve required monthly payments on time when your student loan enters repayment. If you do not make all twelve monthly payments on time, the rebate amount will be added back to your loan principal.
2. Direct Parent PLUS Loans (PLUS hereafter): 2.5% net fee
   • 4.0% origination fee less the up-front 1.5% rebate
   • A loan origination fee of 4.0% is deducted from the PLUS loan funds at the time of disbursement. However, 1.5% of this fee is immediately refunded back to the parent borrower in the form of an interest rebate. The net-cost is therefore 2.5%.
   • Note: To keep the interest rebate, the parent borrower must make the first twelve required monthly payments on time. If the first twelve required payments are not made on time, the rebate amount will be will be added back to the loan principal.

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

See examples for each loan type below:

1. Stafford Student Loan: 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	1.0% loan origination fee
   + 9	0.5% rebate
   $1,741	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 default amount offered on your financial aid award. To calculate the amount you wish to borrow, take the amount you NEED and divide by .995 -- this gives you the amount to borrow.
   
   
2. Parent PLUS Loan: 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)
   - 200	4.0% loan origination fee
   + 125	1.5% rebate
   $4,875	Actual term disbursement credited to the student’s account

   
   Calculating your Parent PLUS Loan: If you want you can reduce the annual amount borrowed from the default amount offered on your financial aid award. To calculate the amount you wish to borrow, take the amount you NEED and divide by .975 -- this gives you the amount to borrow.

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

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.