Federal Subsidized, Unsubsidized and PLUS Loans can carry with them loan fees that are taken out of the principal prior to disbursement. Therefore, borrowers can find that the total of their loan disbursements may be slightly lower than the amount borrowed.
Ultimately, repayment is based on the gross amount borrowed (not the net amount that accounts for these fees). This amount is on your disclosure statement sent to you whenever a new loan is secured. As well, a loan could have accrued interest when you begin repayment.
Origination fees are collected to help pay for the administration of the loan programs by the U.S. Departments of Education and Treasury. These fees are similar to processing fees often attached to consumer loans.
For Direct Loans after July 1, 2012
Direct Loans with their first disbursement on or after July 1, 2012, have a straight forward origination fee. Direct Subsidized and Unsubsidized Loans have a 1.0% origination fee. Direct PLUS Loans (for parents or graduate students) have a 4.0% origination fee.