What are Origination Fees and the Up-Front Interest Rebate?
Origination fees are a percentage fee associated with federal loans that are between 1-4%. The Up-Front Interest Rebate is a rebate of a portion of the origination fees that are refunded to your loan balance that is contingent on on-time payments of the first 12 monthly payments. Subsidized and Unsubsidized Federal Direct Loans have a 1.0% origination fee and also offer a .5% rebate on the origination fee-resulting in a net fee of .5% which will be deducted from the gross amount of the loan borrowed. Once you enter repayment, if you make your first 12 monthly payments on time, the rebate becomes permanent. If you fail to make 12 on-time monthly payments, however, a charge for the initial rebate will be added to the outstanding balance of the loan. The Federal Direct PLUS Loan has a 4% origination fee and also offers a 1.5% rebate on the origination fee-resulting in a net fee of 2.5%, which will be deducted from the gross amount of the loan borrowed. The 12 on-time payment rule also app
