How to Reduce the Origination Fee for Student Loans

A loan origination fee covers the cost incurred by the lender in the process of issuing your loan. This may include paying a loan agent, filing paperwork with the county or simply printing and storing documents. It is not typically possible to completely eliminate the fee. In fact, even low-cost federal loans carry an origination fee up to three percent. However, there are some things you can do to reduce the fee on your student loan so you owe less money up front on your new loan.

Prepare Applications Diligently

If you have problems with your application, you may need to resubmit them. Frequent problems include having the wrong Social Security number or wrong phone number. Every time you withdraw and resubmit an application you could be subject to another fee. Further, if there is misinformation on your application, the loan agent may have to look for your background check or credit report more than one time, increasing potential fees. Eliminate this possibility by double-checking your information before you submit. This is particularly important if you are applying online where there tend to be more errors due to lack of proofreading.

Pay Attention to Deadlines

Loans come with deadlines for applications and funding. This is particularly relevant with federal loan options. Because federal loans are often subsidized or carry grant funding, the earlier you apply the better. Missing a deadline can mean you need to rush the application through, and this will cost extra money. For example, if you are using a private loan and seeking a government guarantee, the private lender will have to file your loan documents with the US Department of Education after you have submitted them to the private lender. This can take weeks, and you will run the risk of needing to pay to rush the documents through the private lender if you wait too long.

Provide Income Statements

You may not have an income, and you will not need to submit personal income statements. However, if you are seeking loans as a dependent student, meaning your parents will pay a portion of your tuition, then you will need to provide information on their income. The same is true if your parents are the ones seeking the loans which is the case with the federal PLUS loan program. The lender may charge you a fee if the lender has to independently contact an employer or bank for income verification. Cut out this step by providing tax schedules or other verification.

File Paperwork Personally

You may not have the option to file your paperwork personally. However, if you are using collateral on your student loans, you may be able to file the lien on your own with the county registrar to reduce the loan origination fee on the debt. This is not a typical requirement on a federal loan. Some private lenders may use collateral. Simply ask about fees for filing paperwork, and then ask if you can file yourself to cut back on those fees.

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