What Are Student Loan Origination Fees? [Video]

Origination fees are up-front fees charged by a lender for processing a new loan application. These fees are used as compensation for putting the loan in place. Origination fees are quoted as a percentage of the total loan.

An origination fee is similar to any commission-based payment. For example, if a student loan lender takes a 1% fee for originating a loan, they will make $100 on a $10,000 loan, or $200 on a $20,000 loan.

When shopping around for student loans borrowers should look to see if their lender is charging origination fees. Many federally issued loans, including Stafford loans, have up to a 1.0% origination fee for each loan disbursement.

Many private loan lenders have decided to waive origination fees on student loans and student loan consolidation as an incentive to students.

Origination fees are an important and sometimes a costly characteristic of consumer loans.