Glossary
A
Academic Period
The time frame for which a student is enrolled; usually, it’s a semester, quarter, or trimester with specified start and end dates.
Academic Year
The period of time utilized by the school to quantify the year's enrollment with specified start and end dates to support the student's eligibility for loan funds.
Accrued Interest
The amount of interest that accumulates on the unpaid principal balance of a loan. It is calculated daily.
Aggregate Loan Amount
The total amount disbursed to a borrower under a given loan type throughout the student's academic career. This amount must not exceed total loan limits for an applicable loan program.
Alternative Loan
Private loans that are not backed by the federal government. They are offered by banks, credit unions and other lenders to supplement federal student loans in order to help meet the full cost of an education.
Annual Loan Limit
The maximum loan amount allowed by a lender/loan program during an academic year.
Annual Percentage Rate (APR)
The true cost of credit for a loan that takes into account all costs of a loan including finance charges, interest, and fees.
Award Letter
The official document issued by a school's financial aid office listing all the financial assistance offered to a student.
Award Year
The year in which financial aid is provided; it usually begins July 1 and ends June 30.
B
Bursar's Office
A college or university office responsible for the billing and collection of outstanding funds due to the school.
C
Capitalization
The process of adding the unpaid, outstanding interest to the principal balance of a loan when the borrower postpones paying interest. This usually occurs during the in school period or during authorized forbearance periods. This will increase the balance due and may increase the monthly payment amount.
Certification
A documented statement from the school that verifies a student’s course of study, enrollment status, and other vital information, thereby confirming a student's eligibility for a student loan.
Co-Signer
A person who has added their credit strength to another person's application for credit and agrees to repay the loan in the event the borrower does not.
Consolidation or Refinancing
The act of applying for a new loan to pay off existing loans into one new loan. Typically, this is done to extend the term or reduce the interest rate and therefore reduce the monthly payment. Some borrowers may look to shorten the term and obtain a lower interest rate as a way to pay off faster and pay less overall lifetime interest on the loan. These loans may have fixed or variable interest rates and terms from five to twenty plus years.
Cost of Attendance or Cost of Education
The total amount, determined by the school, a student must pay for one academic year at their school. It may include tuition, fees, room and board, books, supplies, transportation, and in some cases personal expenses.
Credit-Based Loans
Loans that are made to borrowers based on their creditworthiness rather than financial need.
D
Debt-to-Income Ratio
A calculation used by lenders to determine a person's ability to repay debt. It is calculated by taking monthly debt divided by gross monthly income. The lower the ratio, the higher your chance of loan approval.
Deferment
A period of time during repayment in which the borrower, after meeting certain criteria, is not required to make regular monthly payments. Usually applies to Government loans only.
Delinquent
A payment that is not received by the due date.
Dependent Student
A student whose parents provide for more than half of his or her financial support, is not married, is under 24 years of age, has no legal dependents, is not an orphan of the ward or court, and is not a U.S. Armed Forces veteran.
Disbursement Amount
The amount requested or approved to be sent to the school to cover educational expenses.
Disclosure Statement
A notification or notifications of the actual cost and terms of a loan, which includes the interest rate and any additional finance charges.
E
Economic Hardship
A financial situation where the borrower is having a hard time paying his/her financial obligations.
Education Savings Account
A savings account that allows parents and students to save for education expenses. It allows a taxpayer to deposit up a set amount annually for each child under the age of 18. Withdrawals from an education savings account usually are tax free as long as the withdrawals are used for educational expenses.
Electronic Funds Transfer (EFT)
A transfer of funds by electronic means without the use of physical checks.
Eligible Citizen
A United States citizen, U.S. national, or resident of certain U.S. territories.
Eligible Non-Citizen
A permanent resident of the United States who is able to present evidence from the Immigration and Naturalization Service that he or she is in the U.S. for other than a temporary purpose with the intention of becoming a citizen or permanent resident.
Enrollment Status
The academic standing of a student, generally defined in terms of less than half time, half-time, or full-time enrollment status.
Exit Interview
An in-person or online counseling session with the school’s financial aid office before graduating or withdrawing from school to review the terms and obligations of the outstanding student loans.
Expected Family Contribution (EFC)
The estimated amount the federal government, through the Free Application for Federal Student Aid (FAFSA) process, expects a family to contribute to the cost of a college education based on income, assets, and other circumstances.
F
Federal Family Education Loan Program (FFELP)
A loan program that was authorized by the federal government under the Higher Education Act of 1965, as amended. This program included Federal Stafford, PLUS, and Consolidation Loans. These loans were funded by lenders, guaranteed by guaranty agencies, and ultimately insured by the federal government. The FFELP program was ended in 2010 as part of The Health Care and Education Affordability Reconciliation Act.
Federal Pell Grant
Pell Grants are distributed by the federal government and are designed to help students with financial need pay for college.
Federal Perkins Loan
A campus-based, low-interest education loan for undergraduate and graduate students. The college acts as the lender using a limited pool of funds provided by the federal government. These loans are made to students based on financial need.
Federal PLUS Loan
A federally guaranteed loan that requires a credit evaluation. They are available to parents of dependent students.
Federal Stafford Loan
A federally guaranteed loan that may be awarded on the basis of financial need. Stafford Loans may be subsidized or unsubsidized and are originated by the federal government.
Financial Aid
Assistance provided in the form of grants, scholarships, work-study, and loans to provide funding for an educational expense.
Financial Aid Administrator (FAA)
A staff member at an eligible school who is charged with the administration of financial aid programs.
Financial Aid Office
The department at the school that provides assistance and guidance to students and parents related to education finance and funding.
Financial Aid Package
The total amount of monetary assistance the student can receive including all grants, scholarships, work-study, and loans
Financial Aid Transcript
A record of all federal aid received by a student for each school attended.
Fixed Interest Rate
An interest rate that remains the same for the life of the loan.
Forbearance
A temporary postponement of payments.
Free Application for Federal Student Aid (FAFSA)
The federal form used to determine the eligibility for most types of federal financial aid, not private or alternative loans.
G
Grace Period
A period of time when the student is not required to make student loan payments (usually six or nine months).
Grant
A form of financial aid, similar to a scholarship, which does not have to be repaid.
Gross Monthly Income
Your income from your employment and other sources, before taxes and other deductions.
Guarantee Fee
A fee charged by the government or lender to insure the loan.
H
I
Independent Student
A student who is either married, 24 years of age or older, enrolled in a graduate or professional education program, has legal dependents other than a spouse, is an orphan or ward of the court, or a veteran of the U.S. Armed Forces.
In-School Deferment
A temporary postponement of payments during which the borrower is attending an approved school at least half-time.
Interest
The fee charged to borrow money over time. Interest is generally disclosed and computed as an annual percentage of the principal amount owed.
International Student
A student who is not a citizen or resident of the U.S. that is attending a U.S. based higher Education institute.
J
K
L
Lender
A private or public entity that extends credit to borrowers.
LIBOR (London Inter-Bank Offer Rate)
The interest rate banks charge each other for loans. LIBOR is commonly used as an interest rate index.
Loan
A sum of money a lender provides to a borrower with the agreement that the borrower will repay the money with interest over a period of time.
Loan Balance
The total unpaid amount of a specific loan. This sum includes outstanding principal, capitalized interest, accrued interest, late charges, and any miscellaneous fees such as returned check fees.
Loan Period
The academic period for which loan funds are used to cover the cost of education.
M
Master Promissory Note (MPN)
A Promissory Note that can be used for a single loan and for subsequent loans of the same type.
N
National Student Clearinghouse
A non-profit organization that provides post-secondary student degree and enrollment verification.
Needs Analysis
The process that determines the student's need for financial assistance. The process evaluates the total cost of attendance compared to the Expected Family Contribution (EFC) to provide options to cover the remaining unpaid balance to attend the student's school of choice.
NSLDS (National Student Loan Data System)
A centralized system that stores information from schools and guarantors about federal student loans and other US Department of Education programs, such as the Pell Grant. It enables students to access, from a single location, information about all of the federal aid they have received.
O
Origination
The processing of a loan application from review and approval through final disbursement.
Origination Fee
A fee paid by the borrower to cover administrative fees for loan processing.
P
Payoff Balance
The total amount a borrower owes to pay off a loan in full. It includes the outstanding principal plus any unpaid accrued interest and late fees.
Prime Rate
The Prime Rate, as published in The Wall Street Journal, is the interest rate banks charge their creditworthy customers.
Principal Balance
The original or unpaid amount of a loan upon which interest is calculated. It may include capitalized interest.
Private Student Loan (Alternative Loan)
A student loan that is not guaranteed by the federal government. These loans are offered by banks, credit unions and other lenders to supplement the federal programs.
Promissory Note
A legally binding agreement the borrower and cosigner (if applicable) sign, in which the borrower and cosigner (if applicable) promise to repay a loan with interest in periodic installments.
Q
R
Repayment Period
The amount of time the borrower is scheduled to repay the principal balance and interest on a loan.
Repayment Schedule
A schedule that outlines the repayment terms of a loan such as the number of payments to be paid, the payment amount, the payment due date, and the finance charge.
Refinancing or Consolidation
The act of applying for a new loan to pay off existing loans into one new loan. Typically, this is done to extend the term or reduce the interest rate and therefore reduce the monthly payment. Some borrowers may look to shorten the term and obtain a lower interest rate as a way to pay off faster and pay less overall lifetime interest on the loan. These loans may have fixed or variable interest rates and terms from five to twenty plus years.
S
Satisfactory Academic Progress (SAP)
An eligibility requirement for borrowers to receive federal student aid.
Scholarship
A form of financial aid (monetary award) that does not have to be repaid. Scholarships are available from many sources and can be awarded based on merit, financial need or other criteria.
Self-Certification
A documented statement from the school that verifies a student's course of study, enrollment status, loan amount, and other information, thereby confirming a student's eligibility for private student loans.
Self-Certification Form
A form developed by the US Department of Education to ensure students borrow only what is needed. Borrowers must complete and return the form to their lender as part of the application process for private student loans.
Servicer (Servicing Agency)
An organization that acts on behalf of a lender to perform loan origination, servicing, or collection activities.
Student Aid Report (SAR)
A government report sent to a student who submitted a Free Application for Federal Student Aid (FAFSA). The report informs the student of the Expected Family Contribution (EFC) and the financial aid for which the student is eligible to receive. Schools use the report information to create a financial aid package for a student.
Subsidized Loan
A loan on which the government pays the interest while a borrower is enrolled in school at least half-time and during periods of deferment.
T
Tuition
The cost of instruction at a specific school. Tuition does not include room and board, textbooks, supplies and other fees a school may charge for attendance.
U
Undergraduate Student
A student who is enrolled at a school in a course of study at or below the baccalaureate level.
Unsubsidized Loan
A loan on which the borrower is responsible for paying all interest that accrues on the principal balance from the date of disbursement until the loan is paid in full.
V
Variable Interest Rate
An interest rate that may change periodically (e.g., quarterly or annually) through the life of the loan.
W
W9-S
An IRS form which taxpayers must complete to qualify for possible tax deductions on student loan interest payments.