Origination fee

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M-West: A fee charged and deducted from the proceeds of the Direct Loan or FFEL program loan before the loan is disbursed. The origination fee offsets some of the administrative costs of loan processing. The fee must not exceed the maximum rate established by law. This fee is deducted from the interest and special allowance the Federal government pays the lender. Generally, lending institutions pass this fee on to borrowers at the time the loans are made.