Interest rates and fees
When you accept loans, you accept an original amount called a 'principal'. When you enter into repayment, you will repay more than the original principal. Items such as interest and fees may be added to the principal.
Interest is money paid to the lender in exchange for borrowing money and set into law by Congress. Interest is calculated as a percentage of the unpaid principal borrowed. Below are the current interest rates.
Federal Direct Undergraduate Subsidized Loan
Federal Direct Undergraduate Unsubsidized Loan
Federal Direct Parent Loan for Undergraduate Students
The amount of interest that accrues on your loan is determined by a simple daily interest formula. Multiply your loan balance by the number of days since the last payment times the interest rate factor. The interest rate factor is calculated by dividing your loans interest rate by the number of days in the year. For more information on how to calculate your loan interest and various other calculators, visit the FinAid.org web site.
The Department of Education will charge a 1.0% loan origination fee deducted from each loan disbursement for the process of the loan. Federal Direct Loan borrowers receive an interest rate rebate of 0.5%, reducing the up front fee to 0.5%. This means the loan you receive will be less than the principle you borrow. You will be responsible for repaying the entire principle amount you borrow. Upon entering repayment, borrowers must make their first 12 loan payments on time to keep this benefit. This entire fee goes to the government to help reduce the cost of the loans.
The Department of Education will charge an origination fee and deduct this fee from each loan disbursement that is disbursed: This entire fee goes to the government to help reduce the cost of the loans. The loan origination fee for loans with a FIRST disbursement between:
- October 1, 2015 and September 30, 2016 will have a loan fee assessed at 1.068%.
- October 1, 2014 and September 30, 2015 will have a loan fee assessed at 1.072%.