Hidden Fees and Costs of Student Loans

How to avoid hidden costs in student loans

Student loans often come with multiple hidden costs which trouble borrowers over the years. In uncertain times such as these, navigating graduate school applications and a search for loans can get overwhelming. As a result, it’s crucial that you make wise and well-informed decisions. This can help you stay aware of, and avoid hidden costs. Here, we’ve put together a list of certain hidden costs that you should keep an eye out for, as you evaluate your loan offers. These include:


Processing Fees

Often, education loans come with a baggage of extra fees that the lender charges you. These include the lender’s servicing charges (usually 1%-5% of loan amount) and statutory charges. Additionally, these also include like stamp duties, charges for duplicate copies and other documentation charges which help the lender facilitate your loan.

 It might not be possible for you to remove the cost of processing fess from your loan. But there are ways through which you can minimize them. For instance, if you take a student loan online, you end up avoiding significant paperwork-related charges!

Loan Modifications

Change is constant! After you take your loan, you may want to make changes, like converting the interest rate, rescheduling your payments or swapping one co-signer for another. These changes depend on your personal circumstances and preferences; perhaps your co-signer relocated and is no longer eligible by law to fulfill that duty or you want to convert to a fixed interest rate to make stable payments and save to buy something.

But, most lenders aren’t very welcoming of such changes and charge a fee for all of these.


A penalty is a ‘punishment’ imposed for breaking a law, rule or contract. When you sign your loan agreement, you become party to a legal contract, which requires you to make regular payments. Naturally, when you break such a contract by making a late payment (maybe you forgot to pay the bill), the lender penalizes you with an extra charge.

However, lenders don’t just impose penalties when you aren’t able to pay on time. They are also imposed when you want to cancel your loan (usually 2% of loan amount charged) or if your check bounces due to lack of funds (maybe you spent a little more on coffee the previous month).

Pre-payment Charges

Planning to end your loan by paying off early? Lenders are really shrewd because they even charge you when you’re too good of a customer. In some cases, it might cost you more to end your loan earlier than you planned! That’s because some lenders hit you with a pre-payment penalty, to discourage you from paying back early. Why do they do this? Because this way, they don’t lose income from interest you pay.

Payment Loopholes

You should be extra careful at the time of signing the loan documents and watch out for loopholes. Examples of loopholes can include a lender combining processing fees with loan amount, so you are forced to pay more interest or clauses which prevent you from shifting to a different interest model.

Make sure to read the documents in detail multiple times and double check on the terms and conditions of your loan.

The true cost of your education loan can get confusing and expensive. While researching your options thoroughly and comparing offers from multiple lenders can get painful, it can help you uncover ‘hidden’ costs and pick out a great loan offer. With good research and sagacious decision-making, no cost is hidden.

 At GradRight, we recognize that your loan’s liability should not outweigh your education’s value. Our student loan bidding platform brings you well-researched and personalized loan offers from 35+ domestic and international lenders and provides you with expert advice on picking the best one. It’s completely online. Sign up today and get offers within 24 hours!

Leave a Comment

Your email address will not be published. Required fields are marked *