The Direct student loan has an origination fee equal to approximately one percent of the amount borrowed. The loan fee on the Direct parent PLUS loan is approximately four percent. 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 was an incentive initiated by the U.S. Department of Education in 2000 to promote on-time loan payments. For Direct student loans the rebate was 0.5% of the amount borrowed; for Direct PLUS loans the rebate was 1.5% of the amount borrowed. These rebates reduced the origination fee, which was deducted from the amount borrowed. This means that the College received more funds, which reduced the amount of the student's college bill.
Effective July 1, 2012, the U.S. Department of Education no longer offered borrowers the up-front interest rebate on loans borrowed on or after July 1, 2012.
For more information about the loan rebate, call your loan servicer.