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Origination Fee and Guarantee Fee
The Origination Fee is deducted from the face value of the loan before the student receives
the funds. This fee is sent directly to the federal government and used
to help defray the cost of administering the program. This fee is 1% of
the loan proceeds (effective July 1, 2008) and is stated in your Notice
of Loan Guarantee and Disclosure Statement. Some lenders may pay this fee on your behalf.
The Guarantee Fee is another fee, like the Origination Fee, is deducted before the student
receives the funds. The money from the Guarantee Fee is sent directly to
the Guaranty Agency, and ensures that the Agency will repay the lender
should the loan default or become eligible for loan cancellation. Even
though the Guarantee Agency will pay under these circumstances, borrowers
are still liable to the Guarantee Agency for the money owed under the terms
of the promissory note. The Guarantee Fee is set by federal regulation
and cannot exceed 1%. This fee is also stated in your Notice of Loan Guarantee
and Disclosure Statement.
Example of these costs:
| Loan amount |
$3,500.00 |
| Guarantee Fee (1%) |
- 35.00 |
| Origination Fee (1%) |
- 35.00 |
|
___________ |
| Total amount disbursed: |
$3,430.00 |
Some lenders may pay this fee on your behalf.
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