A loan fee is a charge by a lender for a new loan origination, typically paid for processing or originating the loan. Sometimes this may be called an origination fee. Federal Direct Student loans and Parent PLUS loans charge an origination fee and the fees are deducted from the amount that is disbursed. The amended Higher Education Act of 1965 set a loan fee of 1 percent for all Direct Subsidized and Unsubsidized Loans of 4 percent for all Direct Parent and Graduate PLUS Loans. The Office of Management and Budget (OMB) adjusts the fee annually as of October 1st to add a charge based on the automatic deficit reduction cutting mechanism imposed under the Budget Control Act of 2011.
Many private student loans have no fees because the incorporate the cost of processing the loan into the interest rate, however, it's wise to check. Private loan fees are usually added to the borrowing amount.
For comparison purposes, the fees and the interest rates charged on particular loans become part of the annual percentage rate (APR) shown for a loan. So, if comparing a no-fee vs. a fee loan, use the APR, not the interest rates.