The Direct student loan has an origination fee equal to one percent (1.00%) of the amount borrowed. The loan fee on the Direct parent PLUS loan is four percent (4.00%). The fee is deducted from the loan funds the College receives. The loan fee is kept by the U.S. Department of Education.   

The up-front interest rebate on Direct loans is an incentive initiated by the U.S. Department of Education in 2000 to promote on-time loan payments. For Direct student loans the rebate is 0.5% of the amount borrowed; for Direct PLUS loans the rebate is 1.5% of the amount borrowed. These rebates reduce the origination fee, which is deducted from the amount borrowed. This means that the College receives more funds, which reduces the amount of the student's college bill.

Effective July 1, 2012 the U.S. Department of Education can no longer offer borrowers the up-front interest rebate on loans borrowed on or after July 1, 2012.

To retain the up-front rebate, borrowers who borrowed a loan prior to July 1, 2012 and are in loan repayment will need to make the initial 12 consecutive monthly payments on time. If you do not make these first 12 monthly payments on time, you will lose the rebate and the rebate amount will be added to your principal balance, which will increase the amount that you repay on the loan. 

Example: If you borrow $2,000 in a student Direct loan, the origination fee for 2011-2012 is 1.0%, or $20. The up-front rebate of 0.5%, or $10, is then deducted from the origination fee, so only $10 is deducted from the loan proceeds. This means the College receives $1,990 instead of $1,980 without the rebate. The student borrows $2,000 and needs to repay $2,000. If the rebate is lost during the first 12 monthly payments, then the student will repay $2,010. 

Note that if you begin making monthly payments and you receive a postponement (deferment or forbearance) before making all 12 initial payments, you will need to make another 12 payments on time the next time you enter repayment to keep the rebate. You cannot pick up from where you ended and just make the remaining payments to keep the rebate.

For more information about the loan rebate, call your loan servicer.