The PLUS loan origination fee is 4.228 percent of the amount you borrow, taken out of each disbursement before the money reaches your school. On a $20,000 loan, roughly $845 never arrives at the bursar’s office, but you still owe interest on the full $20,000. The rate has held at 4.228 percent for every Direct PLUS Loan first disbursed between October 1, 2020, and October 1, 2026.1Federal Student Aid. Loan Interest Rates
The fee applies the same way to every PLUS borrower. Parent PLUS or Grad PLUS, strong credit or thin credit, the percentage doesn’t move.
How the Fee Comes Out of Your Loan
You never see a bill for the origination fee. The Department of Education subtracts it proportionally from each disbursement, then sends the net amount to your school. Most schools receive aid in two disbursements, one for fall and one for spring, so the fee is deducted from both.2Federal Student Aid. Direct PLUS Loan Basics for Parents
Take a $10,000 PLUS loan split evenly. Each $5,000 disbursement has $211.40 withheld, and $4,788 shows up at the school. The federal system works in whole dollars and truncates pennies rather than rounding, so a calculated figure of $4,788.60 arrives as $4,788.3Federal Student Aid. Direct Loan Processing Information – No Pennies in Direct Loan Disbursements That’s why the amount on your loan disclosure statement is always higher than what appears on the student’s billing statement, and why families sometimes see a small remaining balance they weren’t expecting.
Why the Rate Is 4.228 Percent
Federal law sets the statutory PLUS origination fee at 4 percent of principal. The rate borrowers actually pay is higher because of sequestration, an across-the-board federal spending mechanism that the Department of Education applies to loan fees each fiscal year.4Federal Student Aid. FY 26 Sequester-Required Changes to the Title IV Student Aid Programs
The federal fiscal year starts October 1, and the rate that applies to your loan depends on the date of your first disbursement, not the date you applied. A first disbursement before October 1 gets the previous fiscal year’s rate; a first disbursement on or after October 1 gets the new one. Through every annual review from October 2020 forward, the PLUS fee has stayed at 4.228 percent. That’s not a guarantee past October 2026, so if your first disbursement lands in fall 2026 or later, check the current rate before you plan around it.4Federal Student Aid. FY 26 Sequester-Required Changes to the Title IV Student Aid Programs
You Owe Interest on the Full Amount You Borrowed
The fee stings more than the deduction alone suggests. Interest accrues on the entire principal, not on the smaller amount your school received. Borrow $20,000, get roughly $19,154 disbursed, and pay interest on $20,000 for the life of the loan.2Federal Student Aid. Direct PLUS Loan Basics for Parents
For PLUS loans first disbursed between July 1, 2025, and June 30, 2026, the fixed rate is 8.94 percent.5Federal Student Aid. Interest Rates for Direct Loans First Disbursed Between July 1, 2025 and June 30, 2026 The $846 taken as an origination fee on that $20,000 loan generates about $75 in interest in the first year alone. Across a standard 10-year repayment, paying interest on money you never received adds several hundred dollars to the true cost of the fee.
How to Borrow Enough to Cover Your Bill
Because the fee shrinks every disbursement, you need to borrow more than the actual tuition gap if you want the school to receive a specific dollar amount. Divide the net amount you need by (1 minus the fee rate as a decimal):
$10,000 ÷ (1 − 0.04228) = $10,000 ÷ 0.95772 ≈ $10,441
Requesting $10,441 leaves roughly $10,000 for the school after the deduction. Because the system truncates pennies, the actual disbursement may land a dollar or two below your target.3Federal Student Aid. Direct Loan Processing Information – No Pennies in Direct Loan Disbursements Running this calculation before you submit the loan request avoids a leftover balance at the bursar’s office, which can trigger late fees or a registration hold.
How the PLUS Fee Compares to Other Federal Student Loan Fees
The 4.228 percent PLUS fee runs roughly four times what undergraduates pay on Direct Subsidized and Unsubsidized Loans, which carry a 1.057 percent origination fee for the same disbursement window.1Federal Student Aid. Loan Interest Rates On a $10,000 loan, that’s $422.80 out of a PLUS disbursement versus $105.70 out of a Subsidized or Unsubsidized one. Both fees come from the same sequestration framework, but the underlying statutory rates differ: 4 percent for PLUS, 1 percent for the others.4Federal Student Aid. FY 26 Sequester-Required Changes to the Title IV Student Aid Programs
Direct Consolidation Loans carry no origination fee. If you later consolidate a PLUS loan, no new fee is charged on the consolidated balance, but the fees already deducted from your original PLUS disbursements are not refunded.
Tax Treatment of the Origination Fee
The IRS treats PLUS origination fees as a form of interest for purposes of the student loan interest deduction, because the fee represents the cost of borrowing rather than a service charge. You don’t deduct the whole fee in the year of disbursement; the IRS requires you to spread the deduction across the life of the loan.6Internal Revenue Service. Publication 970 – Tax Benefits for Education
When your loan servicer reports interest on Form 1098-E, the origination fee portion may or may not be included. For loans made before September 2004, servicers weren’t required to include origination fees, so you can use any reasonable method to allocate the fee across your repayment period. For more recent PLUS loans, the fee should already be reflected in the reported figure.6Internal Revenue Service. Publication 970 – Tax Benefits for Education Claiming the deduction still requires that your modified adjusted gross income falls below the applicable income limits and that you meet the other eligibility rules.