The disbursements I received on my student loans were less than what I was awarded. Why wouldn't I get the full amounts?
Lenders often hold back what are called "guarantee fees" or "origination fees." This money is pooled into a reserve that is meant to strengthen the loan program itself if some of these loans fail to be repaid. The amounts lenders may hold back are determined by the Department of Education for Stafford, PLUS and Direct loans and are capped at 1% and 3% respectively. Alternative loans are not regulated and may have up to 10% held back.
Because origination fees on undergraduate loans can vary widely between lenders, it is a good idea to know what a lender will charge before you go to the trouble of completing application paperwork. Your school's financial aid office may have information on different lenders' fees. If you are working with a lender that's not on your school's list, ask the lender about the origination fee early in the application process.
We understand that graduate loans all carry a 4% -- $40 of each $1,000 borrowed -- origination fee.
Published on BankingQuestions.com 7/28/06
Updated 8/27/2008
BankingQuestions.com is a free service made possible by the generous support of our advertisers. Advertisers are not responsible for site content. Please help us keep BankingQuestions.com FREE by supporting our advertisers. When you see an ad for a product or service you may have an interest in, click through to learn more.
Accounts
Article
Q&A
Podcast
Video
Blog
Discussions
PDF
Powerpoint
Lenders often hold back what are called "guarantee fees" or "origination fees." This money is pooled into a reserve that is meant to strengthen the loan program itself if some of these loans fail to be repaid. The amounts lenders may hold back are determined by the Department of Education for Stafford, PLUS and Direct loans and are capped at 1% and 3% respectively. Alternative loans are not regulated and may have up to 10% held back. 