Many borrowers who apply for educational financial aid do not consider important financial aspects of a student loan; aspects such as hidden fees or interest rates directly affect the loan in ways involving disbursement amount and debt owed.  One stipulation in particular is an origination fee; this fee is variable and subject to change which is scheduled to happen October 1st.

Some explanation of an origination fee is required before focusing on the details of these changes to the federal student aid application fees.

An origination fee is essentially an additional charge after applying for and receiving a loan.  It is normally subtracted from the loan amount which lowers the final loan disbursement.  It is a simple concept when explained through example; for instance, an origination fee of 2% on a loan of $10,000 generates a fee of $200 owed to the lender.

This fee is normally paid by subtracting the origination amount from the loan, so the applicant in the previous example receives a loan of $9,800.  Despite receiving a smaller loan disbursement, the borrower is still expected to pay back the full principal payment of $10,000 plus whatever interest accrues during the loan life.

These fees are quite unpopular which is why many private student loan lenders specifically advertise the absence of origination fees in their application process for both education loans as well as consolidation loans.  On the other hand, the federal government applies these fees to federal student loans.  And due to recent legislation, these rates are subject to change.

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When the Budget Control Act of 2011 passed, the federal budget began decreasing during the subsequent years.  Since the budget directly affects the federal student aid program, many aspects of the program are subject to changes.  One of these changes is the origination fee rate.

The current origination fee for a federal student loan (subsidized or unsubsidized) is set at a rate of 1.068% while the parent option for an undergraduate student loan (PLUS student loans) experienced at rate of 4.272%.

These fees are set to increase by 1 October 2016.  The regular federal loan is set to increase by .001% to the new rate of 1.069%.  PLUS student loans are set to rise by .004% to 4.276%.

While these changes seem minimal, they are felt more severely for larger loans.  When loans start numbering in the tens of thousands, small percent changes become more significant.  Despite this relationship, these fee increases are still slight.  With a change coming in 2016, there are still five more years for fees and interest rates to be altered.  It is entirely possible for more changes to occur in the future.