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