2009 SLA Private Loan Series: Private Loan Fee Structure (Updated)

Based on an analysis of promissory notes for nine major private student lenders and review of their websites, here is a schedule of the fees that they currently charge:

Lender	Origination Fees	Repayment Fees	Late Payment Fees	Payment Return Fee	Other Charges
Chase	None	None	Lesser of 5% of payment or $25	$25	N/A
Citibank	0-6%	None	$15	N/A	N/A
Discover	None	None	Greater of 5% of payment OR $5	$10	N/A
PNC	0-6%	None	Lesser of 5% of payment or $5	N/A	N/A
Sallie Mae	0-5%	None	Yes, in Discl. Statement.	$20	Yes
SunTrust	None	0-6%	Not to exceed 5% of payment	$30	N/A
U.S. Bank	None	None	Lesser of 15% of payment or $15	N/A	N/A
Wells Fargo	None	None	Greater of 5% of payment OR $28	$15	Yes

A few observations:

• The most significant fees, origination and repayment fees, are typically added to loan principal which means they are financed over the life of the loan.  As an example, a 6% origination fee on a $10,000 loan with an average interest rate of 10% can add not $600 but rather $2,000 to the overall loan cost over a 20 year repayment period. 
• Late repayment fees are assessed if a payment is not received late by a specified number of days, usually 10-15 days after the due date.  All lenders, except Sallie Mae provided this information in the promissory note. 
• Payment return fees are assessed if a check or other form of payment is returned unpaid for any reason.  These fees ranged from $10 (Discover) to $30 (SunTrust).  N/A is an indication that the lender did not disclose this fee.
• As posted earlier in the promissory note post, several lenders provided details on additional charges that they assess:
  • Wells Fargo:

"I agree to pay the following charges for additional services I request (a) $5.00 per loan rating, loan verification, duplicate bill, or any document or letter, including (but not limited to) those indicating loan payment in full, loan status, or loan payment history for past 12 months, or copies of any Promissory Note or disclosures; (b) $10.00 per full loan payment history; (c) $15.00 per hour research fee (one hour minimum).  I will also pay a handling charge of $15.00 for each payment on this loan that is returned for any reason, including (but not limited to) insufficient funds or stop payment order.  I agree to have the charge(s) added to my next billing statement."

• Sallie Mae:

"If I request and you agree to provide optional services to me in connection with my loan, you may charge me and I agree to pay the fees for such services.  The fee will be disclosed to me before I accept any such service.  Optional services may include, but are not limited to:  (1) allowing me to make an expedited payment on my loan; and (2) sending documents to me by express delivery or facsimile transmission."

• If you default on your loan, lenders will charge you for court costs, attorneys' fees and collection costs. 

• Forbearance fees (or lack thereof) are generally not disclosed in promissory notes.  However, a recent WSJ article indicated that Sallie Mae's fees for forbearance are:

"The lending giant, which makes both federally backed and private loans, says it grants private borrowers forbearances in increments of up to three months, and may be extended several times, typically up to a total of 24 months. There's a forbearance fee of $50 per loan, up to a maximum of $150." 

SLA advice:  Any calculation of loan costs must incorporate both the interest rate and the origination and/or repayment fees.  Don't immediately disregard loans with these fees since those lenders may offer interest rates lower than the competition.  Look for A.P.R figures provided by lenders which take into account the interplay between interest rates and fees.  To minimize late payment fees and returned payment fees, sign up to have your payments automatically taken out of your checking account.  This will also enable you to take advantage of the 0.25% interest rate reduction that most lenders offer when you sign up for this service.   

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Update (4/22/09):  Origination fee on Sallie Mae Smart Option loan changed to 5%, from 3%.   

Comments

[Lender]

The origination fee on SLM Smart Option loans is 0 to 5%, not the 0 to 3% you reported.