Fed Loan "Origination Fee"???

[risingMC]

So I just recieved a little card from accessgroup telling me that if I get my federal loans through them I get to avoid paying this little $550 "origination fee" that I would otherwise see deducted from my $18500.

What's the catch?

[giffy]

With federal loans the federal government is not always your lender. They jsut subsidize your loan and often there is an origination fee. Different lenders have different programs for federal loans that range from good to bad. I can't say if that offer is good. But shop around and talk to your schools finaid office.

[risingMC]

Ahhhhh....

Thanks!!

[mobie]

Hi MC---shop around because you shouldn't have to pay origination fees...there are programs that offer loans without them! 

[dreamer1]

Hi MC---shop around because you shouldn't have to pay origination fees...there are programs that offer loans without them! 

It appears that access loan is the only one without origination fee from most schools preferred lenders. I had to pay one for my undergrad loans. But I think the most important thing to consider, other than the interest rate, is capitalization.

[Boston24]

Hi MC---shop around because you shouldn't have to pay origination fees...there are programs that offer loans without them! 

It appears that access loan is the only one without origination fee from most schools preferred lenders. I had to pay one for my undergrad loans. But I think the most important thing to consider, other than the interest rate, is capitalization.

Which is what exactly?  Is Access Group not good for this?

[jacy85]

I don't really get any of this, which is why dad's accountant is looking it all over for me! 

[djladyjo]

Check with the school.. the University of Miami pays the origination fee for all students that use their preferred lender (sallie mae).. maybe your school does something similar??

[_____]

Regarding capitalization...

Some federal loans are subsidized--the government pays the interst while you are in school.

Some federal loans are unsubsidized--intrest is accrued while you are in school.

Private loans (ones that are NOT guaranteed by the governement) are NOT subsidized (read: they are UNsubsidized).

For unsubsidized loans you have two options: (1) pay the interest as you go yourself, or (2) CAPITALIZE the interest. Capitalization is when you let them add the interest to your principal (the principal is the original amount borrowed) in exchange for not having to pay the interest as you go . 

Capitalizing your interest on an unsubsidized loan means you don't pay anything while you're in school, but it also means that you will pay more in the long run (because you will be paying interest on the interest you accrue, as opposed to paying the original interest as you go.)

Fully subsidized loans do not involve capitalization, because someone else (the government) is already paying the interest (i.e. doing option 1 of the unsubsidized loans) for you. They will only subsidize up to $8500/year in loans.  The other 10k/year you can get from the government will be unsubsidized.   

If you are like most people you will need to borrow more than the subsidized max of $8500. And no matter who your lender (government, Citibank, Access Group or anybody else), that "more" will be unsubsidized. 

As such, count on either having to make interest payments while you study, or agree to have it capitalized (with the understanding that you will end up paying more in the long run for the convenience of not paying now). 

Personally, I will have it capitalized--I won't have the money to be making any more monthly payments than absolutely necessary, and the last thing I will need during law school is yet another thing to stress me out...So don't freak out about this too much.  Capitalization is very much a necessary evil...

[risingMC]

Awesome. Thanks, annoduck!