Why are my student loan disbursements lower than expected?

Lenders are allowed to retain a percentage of the amount you borrow in "guarantee fees" and/or "origination fees". Guarantee fees are used by the lender in creating a reserve to protect the loan program in instances when borrowers default on their loans. Origination fees are a processing fee retained by lenders.

The Department of Education determines the maximum percentage for guarantee and origination fees for Federal Stafford, PLUS and Direct loans. The maximum origination fee in these programs is 3%, the maximum guarantee fee is 1%. Lenders and guarantee agencies are not required to charge this fee, and some have recently have developed 0% guarantee fee programs.

For private student loan programs, there is generally no maximum fee rate. Fees for private student loans can range from 0% to 10% or more depending on the credit worthiness of the borrower and risk associated with the loan.

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