Student Loans: What Is An Origination Fee On A Loan?

Some lenders add origination fees to their student loans, which may surprise borrowers when they get less than the total amount borrowed, or may mislead them when comparing different loan options.

Before we can analyze them, we need to have a solid understanding of the origination costs that are associated with student loans.

When a lender gives out or processes a loan, they charge fees that are called "origination fees."

What are the origination fees in a student loan?

On federal and some private student loans, origination fees are subtracted proportionally from each loan disbursement, so you receive less than you borrow.

However, a student who obtained one of these loans must also repay the origination costs, as students are liable for repaying the whole amount accounted for in the loan.

Naturally, the origination cost will produce interest, and a new student loan will result in a new origination fee on the new amount borrowed.

As a result, even minor origination fees can be devastating by raising your expenditures over time.

Private student loan origination costs vary by lender; some charge them, while others do not, and some term them  different name, such as an application fee or a disbursement fee.

After Congress adopted them, federal student loans now include origination fees, which vary based on the type of loan taken out.