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There are two fees that may be deducted proportionately from each disbursement of Federal Stafford and PLUS loan proceeds. The first of these fees is the federal origination fee. The federal origination fee is paid by the lender to the U.S. Department of Education (ED). The lender may charge a lower origination fee to a Federal Stafford loan borrower, but is still responsible for remitting the full fee to ED. Currently, Federal Stafford loans are subject to a federal origination fee of 1% and Federal PLUS loans are subject to a 3% origination fee (effective July 1, 2008).
The other fee that may be deducted from federal loan proceeds is the federal default fee. The federal default fee is paid by the lender to the guaranty agency. For FFELP loans guaranteed by ISAC on or after July 15, 2008, ISAC pays one-quarter (25%) of the 1% federally-mandated default fee on behalf of Federal Stafford loan and graduate PLUS loan borrowers, with the remaining portion to be paid by either the lender or the student borrower. (Continuation of this benefit is subject to periodic review).
ISAC does not pay any portion of the 1% fee for Federal PLUS loan parent borrowers.
ISAC-approved lenders are required to remit the applicable portion of the 1% default fee to ISAC, whether that amount is collected from the borrower's loan proceeds or paid on the borrower's behalf by the lender.
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