Even after you’ve calculated your principal and interest costs, you may still be on the hook for additional charges on your student loans. Some student loans charge application or origination fees, and things like late fees or returned check fees can quickly become expensive. However, there are ways to avoid most fees on student loans.

What are student loan fees?

Student loan fees are charges — either a percentage or a flat dollar rate — for taking out the loan or falling short on payments. Both private and federal student loans may charge fees, but they typically have different types of charges.

Some of the fees you might expect from a student loan include:

  • Origination fee: Origination fees are calculated as a percentage of your total loan amount, which is then subtracted from your loan before it’s disbursed to you. All federal student loans charge an origination fee, which is currently 1.057 percent for Direct Unsubsidized and Subsidized Loans and 4.228 percent for Direct PLUS Loans. Some private lenders may charge origination fees as well.
  • Late fee: Late fees may be charged if you don’t make a minimum payment by the due date. They’re usually charged the day after the payment was due, though some lenders have a grace period of up to 15 days. Sometimes it’s a percentage of the amount owed or a flat rate, but usually it totals anywhere from $5 to $25.
  • Returned check fee: Sometimes called an “insufficient funds” fee or “payment return” fee, this charge comes if you don’t have enough money in your account to cover the payment or if your check bounces. It can come out as a flat rate or a percentage of your loan amount, depending on the lender, but usually totals around $20.

All potential student loan fees may not be listed on a lender’s website, so you should review all of the fine print before signing your loan agreement.

How student loan fees affect your payments

Loan fees can have a huge impact on how much you borrow, as well as how much you owe. For one thing, if you take out federal loans, the amount of money you get isn’t the amount you were approved for. For instance, if you request $10,000 and you’re charged the 4.228 percent origination fee, you would receive only $9,577.20 — even though you’re still required to pay back the full $10,000. In some circumstances, this may mean that you have to take out additional loans to cover the full cost of school if your original loan doesn’t.

Late fees or insufficient funds fees can also add up. If your lender charges $25 for a late payment, missing just four payments over the course of the year will add $100 to your loan repayment. To avoid this, it’s a good idea to set up automatic payments so you don’t have to rely on calendar reminders.

Federal vs. private student loan fees

There are a few big differences between federal and private student loan fees. Most significantly, many private lenders have done away with origination and application fees, while origination fees are charged on all federal loans. Some private lenders, like SoFi, have also eliminated other common fees like late fees.

On first glance, this may seem like a strong case for private loans over federal loans. However, fees don’t tell the whole story. Federal student loans come with a slew of benefits and assistance that might help in an emergency, such as the current payment pause as a result of the coronavirus pandemic. Private student loan lenders offered some hardship assistance in the first few months, but that was on a case-by-case basis and not everyone qualified. Most private lenders have resumed payment requirements for borrowers, regardless of income.

Even though federal student loans charge an origination fee to borrow the loan, federal interest rates are fixed and usually much lower than rates offered by private lenders, particularly for borrowers with poor credit scores. This is why it’s almost always best to start your search with federal loans and go to private lenders after you’ve exhausted those options.

The bottom line

It’s a good idea to include fees in your lender comparison between private and federal student loans, but there are other factors to consider as well.

Look to see the full cost of loans, including total interest, monthly payments, repayment plans and forgiveness options. By taking some proactive steps like setting up autopay, you may never have to worry about some of the more common loan fees.