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(Direct Loans) Subject: Origination Fee and Up-Front Interest Rebate Reductions for Direct Subsidized Loans and Direct Unsubsidized Loans

Posted Date:February 06, 2009

Author: William Leith, Service Director, Program Management, Federal Student Aid

Subject: Origination Fee and Up-Front Interest Rebate Reductions for Direct Subsidized Loans and Direct Unsubsidized Loans

As part of the changes to the student loan programs made by the Higher Education Reconciliation Act of 2005 (the HERA), Pub. L. 109-171, the origination fee for Direct Subsidized Loans and Direct Unsubsidized Loans will again be reduced as explained below. This year, the up-front interest rebate will also be reduced. In this announcement and its attachment, we provide operational guidance for schools and third party software providers on implementing these latest reductions in the origination fee and the up-front interest rebate. In summary—

  • For all Direct Subsidized Loans and Direct Unsubsidized Loans for which the earliest disbursement date is on or after July 1, 2009 and before July 1, 2010, the origination fee is changing from 2.0 percent to 1.5 percent.
  • For all Direct Subsidized Loans and Direct Unsubsidized Loans for which the earliest disbursement date is on or after July 1, 2009 and before July 1, 2010, the up-front interest rebate is changing from 1.5 percent to 1.0 percent.
  • Beginning with implementation of the COD System for the 2009-2010 Award Year (scheduled to occur during the period March 27-28, 2009), the COD System will process awards with a 1.5 percent origination fee and a 1.0 percent interest rebate, as appropriate, based on the earliest disbursement date. The COD System will continue to accept awards with a 2.0 percent, 2.5 percent, or 3.0 percent origination fee, as appropriate, based on the earliest disbursement date. The COD system will continue to accept awards with a 1.5 percent interest rebate, as appropriate, based on the earliest disbursement date.

Note: The Direct PLUS Loan origination fee is not changing and will remain at 4.0 percent for Direct PLUS Loans made to both parent borrowers and graduate/professional student borrowers. In addition, the up-front interest rebate amount is not changing and will remain at 1.5 percent for all Direct PLUS Loans.

Contact Information

Please share this announcement with the appropriate staff at your school. If you have questions about this information or need assistance with implementing the origination fee and up-front interest rebate reductions, contact the COD School Relations Center at 800/848-0978. You may also e-mail CODSupport@acs-inc.com.

Last Modified: 02/05/2009