How to Calculate Your Loan Application Amount
When applying for the amount needed, borrowers should take into account the origination fee when calculating the gross amount of the loan proceeds.
The formula to calculate the amount needed to borrow prior to the deduction of the origination fee is as follows:
[Amount needed] ÷ (divided by) [0.95764] = Gross loan amount to be borrowed/applied for
For example, if a parent needed to borrow a PLUS loan to cover $10,000 in annual expenses, he/she would need to apply for $10,442 to allow for the deduction of the origination fee. The formula would be:
$10,000 ÷ 0.95764 = $10,442 (gross amount to be borrowed)
The lender would then deduct the 4.236% origination fee ($442) on the $10,442 borrowed, which would yield a $10,000 net loan disbursement equal to the loan amount needed.