Terminology Explained
Accrued Interest: The interest that accumulates on the loan principal between payments of principal or during periods of forbearance or deferment. In general, the accrued interest must be paid before money is applied to reduce the principal amount of the loan. In some cases, the interest may be capitalized. (see Capitalization below)
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Additional Unsubsidized Stafford Loan: A dollar amount of loan money above the annual loan limit of the Stafford loan available only to independent undergraduate students, graduate/professional students, and dependent undergraduate students whose parents are unable to obtain a PLUS loan. This loan is not based on financial need.
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Award Notice: Notification from the school that lists the types and amounts of financial aid students are eligible to receive; i.e. federal grants, scholarships, work study, and student loans.
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Cancellation: Forgiveness of part or an entire loan.
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Capitalization: An increase in principal balance of a loan that occurs when a lender adds accrued interest (see above) to the outstanding principal balance.
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Consolidation: The payoff of existing student loans with the creation of a new loan.
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Cost of Attendance (COA): Determined by the school, this is an estimate of the student's educational expenses for a period of enrollment, such as a semester or an academic year, for example, two semesters or four quarters. The COA includes tuition and fees, books and supplies, room and board, and personal/miscellaneous expenses.
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Dependent Student: Students under 24 years of age are considered dependent for financial aid purposes unless they meet the criteria established to be considered independent. Dependent students are required to provide parental information when applying for financial aid. Extenuating circumstances must be discussed with the school’s financial aid office. (see Independent Student)
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Default: For practical purposes, a loan is considered in default if the borrower (or an endorser or comaker if there is one) fails to make a payment for 270 days (nine months). You may also be considered in default on your loan if you fail to meet other terms of the promissory note, such as notifying the lender of a change of address. See your promissory note for specific information about default.
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Default Fee: A fee that the United States Department of Education requires of the guarantor to charge the borrower.
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Deferment: The U.S. Department of Education has established categories under which you may be able to cease making payments of principal (and interest for subsidized Stafford loans). If you meet the criteria for one of the categories, the lender must grant the deferment. Ask your lender for specific information about deferments for which you may be eligible.
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Disbursement: The term used by lenders and schools to mean that the proceeds of your loan have been delivered by the lender to the school in accordance with federal regulations. Your loan may have multiple disbursements during your period of enrollment. Each disbursement may have fees taken from the amount you borrowed (see Default Fee and Origination Fee). Disbursements may be made by paper check or by electronic funds transfer (EFT). Disbursements must be delivered to the school and are applied directly to what you owe the school first; amounts greater than owed are refunded to you for living and personal expenses.
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Documentation: A written or printed paper, a supporting reference, or a record that can be used to furnish evidence, proof, or information. Lenders and schools are required to document your eligibility for your loan and other financial aid. Sign and return any forms you receive from your lender and school.
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Expected Family Contribution (EFC): This is the amount you, your spouse (if you are married), and your family is expected to contribute toward your cost of attendance. The EFC is calculated by a federal processor based on the information you provide on the Free Application for Federal Student Aid (FAFSA). The EFC is then reported by the school and used to determine your eligibility for various types of financial aid, including loans.
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Extended Repayment Plan: For loans borrowed on or after 10/07/98 and which total at least $30,000, the term of the loan repayment may be increased from the original ten years to a maximum of 25 years without consolidating.
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Federal Direct Student Loan Program (FDSLP): A loan program similar to the FFELP; funding comes directly from the U.S. Treasury rather than from private lending institutions. FDSLP laws are made by Congress and approved by the President.
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Federal Family Education Loan Program (FFELP): The Federal Stafford, Graduate PLUS, Parent Loan for Undergraduate Students (PLUS), and Consolidation Loan Programs which are funded by private lending institutions, guaranteed by guarantors, and reinsured to the guarantor by the federal government. FFELP laws are made by Congress and approved by the President. The program is regulated by the U.S. Department of Education.
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Federal Perkins Loans: Low interest loans for undergraduate and graduate students with exceptional financial need. These loans are made through your school's financial aid office, and the school is your lender.
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Federal Subsidized Stafford Loan: This loan is based on financial need. The federal government pays the interest to the lender on your behalf while you are in school, during the six-month grace period which begins when you leave school, and during eligible periods of deferment after the loan enters repayment.
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Federal Unsubsidized Stafford Loan: A loan not eligible for interest to be paid by the federal government to your lender on your behalf. You are responsible for the interest on an unsubsidized loan during in-school, grace, and deferment periods, in addition to repayment periods. During the in-school, grace, and deferment periods, you may make payments or you may allow the interest to capitalize.
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Financial Need: The student’s cost of attendance (COA) minus the expected family contribution (EFC). Financial need minus scholarships, grants, and work equals the student’s and parent’s federal loan eligibility.
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Forbearance: A period of time during which you are not required to make principal payments on your loan(s). You continue to be responsible for the interest, which you may pay or may allow to have capitalized. It may be mandatory for a forbearance to be granted by the lender if you meet certain criteria; or the lender may use its discretion in providing you a forbearance. Call your lender or servicing agent if you need time off from making full payments on your loan(s).
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Free Application for Federal Student Aid (FAFSA): The form you must complete to apply for federal financial assistance, including the Federal Pell Grant and Stafford loans. You must include financial information on your entire household to calculate the expected family contribution (EFC). Some scholarship programs also require the FAFSA be completed. This process of applying for financial aid is completed annually.
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Full-Time Student: Your enrollment status is determined by the school you are attending, and may vary from school to school. Full-time students are those carrying a pre-determined number of hours established by the school that it considers a full-time course load.
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Grace Period: The period between the date you cease to be enrolled at least half time and the date repayment initially begins on a Stafford loan. For most Stafford loan borrowers, the grace period is six months.
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Graduate or Professional Student: You are a graduate or professional student if you: (1) are enrolled in a program or course of study above the baccalaureate level at an institution of higher education, or are enrolled in a program leading to a first professional degree; (2) have completed the equivalent of a least three years of full-time study at an institution of higher education, either before entrance into the program or as part of the program itself; and (3) are not receiving Title IV aid as an undergraduate student for the same period of enrollment.
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Graduate PLUS: A non-need-based loan available to graduate and professional level students, up to the cost of attendance.
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Graduated Repayment Schedule: A repayment schedule under which your payments steadily increase (usually in two or more increments) during your repayment period.
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Guarantor or Guarantee Agency: A state or a private non-profit organization that has an agreement with the U.S. Secretary of Education to administer a loan guarantee program under the Higher Education Act. The guarantor is the insurance agent for your loan and will repay your loan to your lender if you fail to do so and report your status to the federal government which will collect your loan.
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Half-time Student: You are considered a half-time student if you are carrying an academic workload that amounts to at least half of the workload of a full-time student, as determined by the school. (see the definition of full-time student)
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In-School Period: A time during which you are enrolled on at least a half-time basis at a school that participates in the federal financial aid programs governed by the Higher Education Act, Title IV.
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Income Contingent Repayment Schedule: A repayment schedule for Federal Direct Loans (FDSLP) under which your monthly payment amount is adjusted annually, based on the total amount of your direct loans, your family size, and the Adjusted Gross Income (AGI) reported on your most recent income tax return. If you are married and filing a joint income tax return, the AGI includes your spouse's income.
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Income-sensitive Repayment Schedule: To qualify for this repayment option you must provide proof of your monthly gross income i.e.: pay stubs, or if you are self employed, a letter signed
by you stating your most recent month's income. If you qualify,
your loan(s) will be set up on a schedule that allows for a payment
amount based on your income.
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Independent Student: You are an independent student if you meet any one of the following seven criteria:
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You are at least 24 years old
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You are married
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You are enrolled in a graduate or professional educational program
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You have, and care for, legal dependents other than a spouse
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You are an orphan or ward of the court (or were a ward of the court until age 18)
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You are a veteran of the U.S. Armed Forces
- You are serving on active-duty in the military for purposes other than training
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Interest: The amount of interest you pay to the lender for the privilege of using its money to pay for your education. This amount will be disclosed to you when you begin repayment on your loan(s).
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Need Analysis: A standardized assessment of you and your family's ability to contribute toward educational expenses.
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Parent: Your biological or adoptive mother or father. A court-appointed legal guardian should contact your school's financial aid office.
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Pell Grant: A Federal, need-based grant. Your need is determined by the information you provide on the FAFSA.
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PLUS: The Federal Parent Loan for Undergraduate Students (PLUS) was created to allow a parent to borrow the funds needed to finance the education of a dependent student.
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Post-Secondary Schools: Public and private; two and four year colleges or universities, technical and vocational training institutions; schools must meet eligibility requirements to participate in federal financial aid programs.
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Principal Balance: The amount of your student loan on which your lender charges interest. Each time you make a payment, a portion of each payment is used to satisfy interest that has accrued and the remainder of the payment is used to reduce the outstanding principal balance. For an estimate of how much principal and interest you pay with each payment over the life of your loan, ask your lender or servicing agent for an amortization schedule.
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Private, Non-Federal Loans: Also called alternative loans, they usually have higher interest rates and the repayment terms are less flexible than the federal programs. Your school can direct you to these programs if you need assistance beyond the financial aid you were awarded. You should borrow under the federal loan programs before seeking non-federal loans.
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Repayment Period: The period of time during which you are responsible for payments of principal and interest on your loan. Under a standard repayment schedule, this is ten (10) years. For other types of repayment schedules, the length of the repayment period may be longer. If you request and are granted a deferment or forbearance, your repayment period will be extended by the number of months of the deferment or forbearance.
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Satisfactory Academic Progress (SAP): The level of academic progress required by the Federal Higher Education Act (HEA) in order for a student to be eligible to receive Title IV aid, including Federal Stafford, Graduate PLUS, and Parent PLUS loans. Each school must establish a standard for evaluating a student's academic progress within a given period of time. In making this evaluation, the school must establish the normal time frame for completion of the course of study in which the student is enrolled, and a method, such as grades or work projects completed, to measure the quality of the student's performance. Students who do not meet the school's established standard for SAP are put on academic probation and may become ineligible for financial assistance.
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Standard Repayment Schedule: A schedule for making your loan payments in regular installment amounts, with each installment due on the same date each month. The standard repayment schedule cannot exceed ten (10) years, excluding in-school, grace, deferment, or forbearance periods.
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Student Aid Report (SAR): Your financial aid need analysis report. The SAR summarizes information that you reported on the FAFSA and is used by the school to determine the types and amounts of aid for which you are eligible. The SAR is generated by a federally contracted agency, which is responsible for processing your FAFSA.
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Title IV: A section of the Higher Education Act of 1965, as amended, that authorizes Federal loan, work, and grant financial assistance programs for post-secondary education.
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Undergraduate Student: A student who is enrolled at or below the baccalaureate level in a course of study that usually does not exceed four academic years, or is up to five academic years in length, and is designed to lead to a first degree.
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