February 21, 2008

Do You Know the Answer?

Q. Do the HERA-related scheduled reductions in origination fees for Stafford loans also apply to PLUS loan borrowers?

A. No. The Higher Education Reconciliation Act of 2005 (HERA) made changes to the Higher Education Act (HEA) to reduce and eventually eliminate the origination fee that Federal Family Education Loan (FFEL) lenders are authorized to charge Stafford loan borrowers. The mandatory 3 percent origination fee for PLUS loan borrowers did not change.

The current origination fee for Stafford loans for which the first disbursement is made on or after July 1, 2007 is 1.5 percent. Below is a listing of the origination fees for the next three years.

Loans first disbursed on or after:

• July 1, 2008 will have a fee of 1.0 percent;
• July 1, 2009 will have a fee of 0.5 percent; and
• July 1, 2010 will have a fee of 0.0 percent.