When you apply for a student loan, lender processes your application before it can be approved. In industry terms, this is known as to as student loan origination.

Origination

Think of the root word “Origin.” This is a brand new loan, created by the lender for you.

Student loan origination basically refers to all the administrative work that is involved from the time you apply for the loan till the time that the funds are disbursed to you or till the time that your application is rejected.

Origination Fees

What comes as a surprise to many borrowers is that lenders often charge them a fee to issue or originate their loan. You do not have to pay this fee when you apply for the loan. If your application is approved, you will receive the funds minus the origination fee. However, although the origination fee is deducted at source and you do not actually get it in your bank account, it is still considered as part of your loan and you will have to pay it back along with the funds you’ve received.

Student loan origination fees vary from one lender to another. Some may waive off this fee altogether as an incentive to attract more business. It is a good idea to always check with the lender before you sign any agreement. Even if a lender waives off the origination fee, do not automatically assume that you are getting a great deal on your loans. Some lenders may impose other fees or a higher interest rate to make up the cost and you could end up with a more expensive loan.

Before signing any loan, always check with the lender about all costs involved and do your calculations to determine how much you are committing to pay over the life of your loan.

Use College Raptor’s free Student Loan Finder to compare lenders and interest rates side by side!