Advertiser disclosure

What is a Student Loan Origination Fee?

As you think about going to college, it’s normal to wonder about how to pay for your degree. There are numerous ways to fund your education, and one of those is through student loans. While most people know they will pay interest on their loans, they don’t always know about the additional fees. One such fee is a student loan origination fee, which usually is charged when accepting a federal loan. Find out more about origination fees and how they impact you below!

What is a student loan origination fee?

Student loan origination fees apply to loans you receive from the federal government. That means that some private student loans don’t include them. Basically, an origination fee is charged by the lender (in this case, the federal government) for processing the loan. Usually, origination fees are a percentage of the loan that the lender withholds from the final amount disbursed to colleges or universities. 

Student loan origination fee percentage rate cost

For both subsidized and unsubsidized loans received after October 2020, the origination fee is 1.057% of your loan. Direct PLUS loans have a fee of 4.228%. Remember, these rates are subject to change each year. 

How origination fees affect loans

Origination fees cause the money you accept to be somewhat lower than what you might expect. Remember, the loan issuer is in a sense keeping a percentage of the loan amount to pay back the origination fee. However, it can be beneficial to still take out a federal student loan because they have lower interest rates. Keep in mind that borrowers are still held liable to pay back the entire student loan amount plus interest, even if the origination fee took a percentage of the loan. 

Also see: Our guide to finding and applying for private student loans

The future of student loan origination fees

Prior to October 2020, federal loan origination fees were 1.059% and 4.236%, which means they have gone down by about .002% and .008%, respectively. This might not seem helpful by just looking at the numbers, but it demonstrates that there’s a desire for student loan fees and interest rates to go down. No matter what happens with student loan origination fees, make sure you fill out the FAFSA.

Free Application for Federal Student Aid (FAFSA)

Remember, financing your college education starts with filling out the FAFSA. If students do not fill out the FAFSA, they will be ineligible for need-based financial aid. Whether you believe you qualify for financial aid or not, we recommend submitting your FAFSA! 

Alternative routes to taking student loans

Student loans are not the only way to fund your college education. There are a number of ways to either eliminate or reduce the amount of student loan dollars borrowed. Keep reading for a few ideas!

Tuition reimbursement

Employment at a company that offers tuition reimbursement is one way to avoid loans and earn a salary–a win-win! Many top companies offer tuition reimbursement for qualified employees, and the list continues to grow. 

Related: Top companies that offer tuition reimbursement

Attend community college and in-state public colleges/universities

Students who earn their degree at community college often attend for free. Currently, the majority of states offer tuition-free community college. Try to also take advantage of colleges and universities within your state to qualify for in-state tuition. Attending an in-state college can drastically reduce the price of tuition. The in-state option also allows some students to live at home, which is another money-saver. 


No matter what route you take for funding your college education, there are a variety of scholarships available. Using an online tool to search by classification, major, and other personal information makes the process easier. Check out our scholarship database to get started!

Key Takeaways

Key Takeaways

  • Loans issued by the federal government incur loan origination fees
  • Origination fees are charged for costs involved in issuing loans
  • Origination fees are a percentage of the loan that the lender withholds from the final loan 
  • The dollar amount actually disbursed to colleges or universities will be less than the actual loan amount
  • All federal financial aid starts submitting the FAFSA
  • There are a number of ways to avoid taking loans or lower the amount of money borrowed
Key Takeaways