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As you research all of your options on how to pay for your college education, understanding the impact of fees associated with your student loan – and how to avoid them – is an important part of the process. After all, student loans are costly enough!
Here, you’ll learn about the common types of fees you’ll encounter with student loans, tips for saving money, and explore some of the available private student loans with no fees.
Luckily, many student loans, both federal and private, don’t have any fees, though there are still some with associated fees.
Understanding these fees, how they work, and what to expect when applying for student loans is how you can end up saving yourself money in the long run.
For instance, most federal student loans have loan fees that are a percentage of the total loan amount, which is deducted proportionately from each loan disbursement you receive while in school. Therefore, you end up repaying the entire amount you borrowed plus loan fees.
Check out this Student Loan Payment Calculator to see what your payments may look like for various loans.
If you’re searching for private student loans with no fees, one of the available sponsored listings is Ascent. They offer competitive rates and have:
- No Origination Fees
- No Disbursement Fees
- No Loan Application Fees
- No Early Repayment Fees
Plus, Ascent Student Loans offer competitive rates and an interest rate reduction if you enroll in Auto Debit. In addition, Ascent offers student loans that don’t require a cosigner (as long as you meet minimum requirements) so that you can start building your financial independence without burdening your family or friends.
Federal and Private Student Loan Interest Rates
Regardless of the type of student loan you decide is right for you, there is one kind of student loan fee that is unavoidable: interest.
As with all other types of fees for student loans, the interest rate varies depending on the type of loan and may change from year to year. For instance, the interest rates for undergraduate federal student loans first disbursed on or After July 1, 2018 and Before July 1, 2019 are:
- Direct Subsidized Loan: 5.05%
- Direct Unsubsidized Loan: 5.05%
- Parent PLUS Loan: 7.6%
However, when it comes to private student loans, the interest rates may vary depending on a number of considerations, such as credit score and whether you choose variable or fixed rate interest.
Common Types of Federal and Private Student Loan Fees
Some of the most common private student loan fees include:
- Application Fee: Fee that the lender charges to process your loan application.
- Origination Fee: Fee that the lender charges to process a loan agreement. Typically, it is a percentage of the total amount borrowed, with the average between 1 percent and 6 percent.
- Prepayment Fees: Some loans penalize you for making payments early in order to reduce the amount of interest you’ll pay over the life of the loan. However, federal loans do not have any prepayment fees and many private lenders have eliminated the policy as well.
Keep in mind that many private loans don’t have any fees because of the competitive nature of the industry and they don’t want to scare off potential applicants. However, there are still some loans that do charge various fees, so be sure to do thorough research before applying.
On the other hand, some federal student loans have an origination fee that ranges between 1.069 percent for Direct Federal Loans and 4.264 percent for Parent PLUS Loans.
4 Ways to Avoid Fees on Your Student Loans and Save Money
The more you can reduce your student loan fees, the more likely you will be able to reduce the amount you’ll have to pay back for the life of the loan, which is why it’s important to find ways to save yourself money and stress in regards to student loans.
Below are four ways you can avoid student loan fees and save money.
#1: In-School and Grace Period Deferment
One of the positive aspects of student loans is that many private and federal loans offer in-school deferment and a grace period. This means you don’t have to make any payments on your student loans while you’re still attending school on at least a part-time basis and for six months after you stop attending.
However, making payments while in school and during your grace period may actually save you money in the long run. That’s because some loans, including unsubsidized federal loans and some private loans (depending on the terms and conditions), start accruing interest once you receive the funds. That means when you start making payments after your grace period, you’ve already accrued interest.
If anything, try to at least make interest payments during your grace period (and, if you can, while still in school) to keep the interest from accruing too much.
#2: Automatic Debit
One of the most common ways to reduce your interest rate is to sign up for automatic debit. Most private student loans, and some federal student loans, offer the option of automatic debit to reduce your interest 0.25 percent (with some as high as 0.5 percent). This may not seem like a lot, but, over the life of the loan, this may save you a good deal of money.
#3: Consolidate or Refinance
When it comes to paying for college, you may take out a number of different loans, some federal, some private. Later, as you pay back your loans, keeping track of all the different monthly payments and how much you owe on each can be difficult.
One way to reduce your stress is to consolidate your loans into one loan, with one interest rate, usually the highest. However, if you have a good credit score and high income, you can refinance your student loans to lower the interest rate, whether they are consolidated or not. You may lose some federal protections when you refinance though.
#4: Public service loan forgiveness
There are a variety of loan forgiveness programs, but the largest is the Public Service Loan Forgiveness (PSLF), which offers people who work for nonprofits or for the government to have their loans forgiven after ten years of regular monthly payments.
However, there are many other forgiveness programs, including those for nurses, teachers, doctors, and many other professions. After graduation, be sure to check if there are loan forgiveness programs available to you.
Find the Perfect Student Loan for You!
Now that you understand the different types of student loan fees and how they can affect how much you owe, it’s time to find the perfect student loan for you.
Search for private student loans using our LoanFinder, where you’ll also find our refinance and consolidation options. Or, continue reading about private student loans to see what you may qualify for.