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Federal loans

Everything You Need to Know About Student Loan Fees 

Updated 09/12/2021

When you take out student loans, you’re not just agreeing to repay the money you borrow. As with any other kind of loan, you as the borrower also agree to pay any necessary fees and interest that come with it.


Both private and federal lenders require different fees, and it’s important to know what to expect with each type of loan. Knowing this information will help you be prepared and come up with a plan for how you’ll repay your loans.


What Are Student Loan Fees?


When you take out student loans, your lender charges different fees to cover the cost of loaning you the money. You’re agreeing to pay interest on the loan, which is calculated as a percentage of the total loan amount.


In addition, you may be required to pay a one-time fee for your lender to originate the loan. And once you begin the repayment process, some lenders may charge a fee for any late payments.


Federal Student Loan Fees


In addition to interest payments, you’ll pay an origination fee on each federal student loan disbursed while you’re in school. For loans taken out on or after Oct. 1, 2020, the fee is 1.057% of the total loan amount.


Private Student Loan Fees


Unlike federal loans, most private lenders don’t charge an origination fee (although, there are a few that do).


If you decide to take out private student loans, just make sure you do your research first. Apply with multiple lenders and compare the offers you receive. And make sure you understand the terms and conditions before signing on the dotted line.


APR & Private Student Loans


If you are considering a private student loan, you’ll want to pay attention to APR, or “annual percentage rate.” Your APR (a percentage) represents the yearly cost of borrowing your loan, including fees or additional transaction costs. It does not take into account the effects of compounding.


Knowing a loan’s APR is helpful for comparing the terms of two loans. If, for example, one lender offered an APR of 5.7% while another promoted an 8.9% APR, you can move forward knowing that a loan with the higher APR would cost more in the long term.


The Bottom Line


Fees are a necessary aspect of any student loan, but remember: it’s worth it if your student loans help you get through college and earn your degree. Just make sure to do your homework and consider all of your options first.