Sequestration to increase Direct Loan Origination Fees
As a result of Sequestration going into effect, loan origination fees on the Federal Direct Student and Parent Loan programs will see a slight increase to its origination fees, beginning with loans disbursed on or after July 1, 2013. Origination fees are deducted from the loan prior to disbursement. The Direct loan origination fee will increase from 1.0% to 1.051%, and on PLUS Loans, from 4% to 4.204%. On a $3500 freshman loan, the increase means the disbursed amount, after fees, will be $3463.25 instead of the current amount of $3465.00. On a $4,000 PLUS Loan, the disbursed amount will decrease from $3,840 to $3831.84.
Direct Loan Interest rate reduced for 2013-14
With the signing of The Bipartisan Student Loan Certainty Act of 2013, the annual interest rates on the Federal Direct Loan programs were reduced for the 2013-14 academic year and beyond. The interest rate for undergraduate students was reduced to 3.86% for both the subsidized and unsubsidized Loans, while interest on the Unsubsidized Direct Loan was reduced for graduate students from 6.8% to 5.41%. The Federal Direct PLUS Loan for both parents and graduate/professional students also saw an interest rate reduction from 7.9% to 6.41%. Interest rates on all of the Direct Loan programs also had interest rates capped to protect students against future economic conditions that might otherwise raise the interest rates dramatically.