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Glossary

• Accrued Interest
  The interest that accumulates on the unpaid principal balance of a loan.

• Annual Percentage Rate (APR)
  The interest maintained on a loan for a one-year period.

• Award Letter
  A letter to the student, generated by the school, which notifies the student of the financial aid they are eligible to receive. In order to receive the financial aid, the student must sign the form and return it to the school.

• Capitalization
  The addition of unpaid, accrued interest applied to the principal balance of a loan which increases the total debt outstanding. Subsequent interest accrues on the new total principal balance which includes any capitalized interest.

• Co-signer
  A signer other than the borrower who agrees to assume responsibility for repayment in the event that the borrower fails to repay.

• Consolidation
  Combining two or more education loans into a new loan that has a longer repayment term and a single monthly payment that is smaller than the sum of previous monthly payments. By consolidating eligible federal student loans and extending the repayment term (up to 30 years depending on the total loan amount), repayment can be easier. Note that while this may ease cash flow, consolidation can add significantly to the amount of overall interest that is paid over time.

• Cost of Attendance
  The cost of the student's education including tuition, room and board, transportation and books, as defined by the institution the student is attending.

• Default
  Default is the failure of a borrower to repay his or her student loans. The point at which a student loan is considered to be in default depends on the type of loan.

• Deferment
  An authorized period of time during which a student loan borrower may postpone making payments on the principal or the principal plus interest. Borrowers generally must file deferment forms with their lenders. Deferments are available if borrowers are enrolled in school at least half time, enrolled in a graduate fellowship program or rehabilitation training program, disabled, serving in the military or the Peace Corps, volunteering full time for a nonprofit corporation, teaching full time in a teacher shortage area, unemployed or experiencing demonstrated economic hardship. The federal government makes interest payments on Subsidized Federal Stafford Loans during deferment periods.

• Delinquency
  The failure to make scheduled monthly loan payments when they are due.

• Dependent Student
  For purposes of determining eligibility and need, students are judged to be either dependent on their parents for financial support or independent of parental financial support. For federal student aid programs, dependency status is determined according to federally established guidelines--a dependent student is one who is not yet 24 years of age, unmarried, has no dependents, is not a veteran of the Armed Forces, is not a graduate student or is not an orphan or ward of the court.

• Disbursement
  A transaction that occurs when a lender releases loan funds. Disbursements for most student loans are made in equal, multiple installments. Checks are either mailed to the institution or are deposited directly in the student's account by a process called electronic funds transfer (EFT).

• Due Diligence
  The use of extensive and documented procedures for collection of student loans along with full and timely disclosure to borrowers of their rights and responsibilities. Minimum due diligence activities for collection of student loan debt is mandated by the federal government.

• Entrance/exit interviews
  Counseling sessions borrowers are required to attend before receiving their first federal loan disbursement and prior to leaving school.

• Estimated Financial Aid (EFA)
  The school's estimate of the amount of financial assistance from federal, state, institutional or other sources that a student (or parent on behalf of the student) will receive for a period of enrollment. This may include scholarships, grants, financial need-based employment or loans. EFA does not include certain loans used to replace the expected family contribution or federal work-study or any other funds that the student has declined.

• Expected Family Contribution (EFC)
  The dollar amount that a family is expected to pay toward a student's educational costs. This calculation is based on family earnings, assets, number of students in college and size of family. EFC is subtracted from total costs of attendance to arrive at an estimate of a student's unmet need for the particular institution the student is attending.

• Extended Repayment Schedule
  A repayment plan limited to new borrowers with loans first disbursed on or after Oct. 7, 1998. To be eligible for this repayment schedule, the borrower must accumulate outstanding FFELP loans totaling more than $30,000. The lender may schedule the borrower for level or graduated installments over a period not to exceed 25 years, but must ensure that annual payments total at least $600 or the outstanding balance of the loan, whichever is less.

• Federal Default Fee (Guarantee Fee)
  A fee deducted from the loan proceeds prior to disbursement and paid to the guarantor. Also known as an "insurance fee."

• Federal Direct Loan Program (FDL or FDSL)
  Education loans provided through the U.S. Department of Education. Also known as The William D. Ford Federal Direct Loan Program.

• Federal Family Education Loan Program (FFELP)
  Education loans provided by private lenders and guaranteed by the federal government. Subsidized and Unsubsidized Stafford Loans, PLUS and Graduate PLUS Loans are included. This program was formerly known as the Guaranteed Student Loan Program (GSL).

• Federal PLUS Loan
  Federal loans for parents of undergraduate students available through the Federal Direct Loan Program or lenders who participate in FFELP. Parents may borrow up to the total cost of education minus any student aid awarded, per child. Loans are made without regard to financial need but borrowers must demonstrate that they do not have an adverse credit history. Repayment generally begins within 60 days of disbursement. These loans are the parent's responsibility and must be repaid.

• Federal Perkins Loan
  One of several federal loan types available to help students meet their financial needs for higher education. These loans are generally made to students with high financial need and are awarded by each individual institution. The interest rate is 5 percent and the grace period is nine months. These loans must be repaid.

• Federal Stafford Loan
  Federal loans for students, both undergraduate and graduate, available through the Federal Direct Loan Program and lenders who participate in FFELP.

• Federal Stafford Subsidized Loan
  Federal loans for students, both undergraduate and graduate, available through the Federal Direct Loan Program and lenders who participate in FFELP. Subsidized Federal Stafford Loans are made on the basis of financial need and the government pays the interest while the student is enrolled. Repayment may take up to 10 years, but is deferred until six months after a student graduates, leaves school or drops below half-time status. Borrowers may be charged a 3 percent origination fee and a guarantee of up to 1 percent, both deducted from the face value of the loan before disbursement. These loans must be repaid.

• Federal Stafford Unsubsidized Loan
  Students who do not qualify for a Subsidized Federal Stafford Loan, or who need additional funds, may borrow an Unsubsidized Federal Stafford Loan. Interest rates and repayment terms are similar to those of the Subsidized Federal Stafford Loan, with one important difference. The government does not pay the interest while the student is enrolled in school, in deferment or in their grace period. A student is not required to make payments while in school, in deferment or in their grace period, but interest begins accruing immediately. These loans must be repaid.

• Financial Aid Award
  A combination of federal, state or private aid. Typically a student receives an award from the school they are attending that includes both gift aid and self-help aid, some private and some public.

• Financial Need
  The difference between what it costs to attend a particular college minus the expected family contribution as determined through the FAFSA. Sometimes this is also called demonstrated financial need.

• Fixed Rate
  An interest rate that remains the same for the term of the loan. All federal loans disbursed after July 1, 2006 have fixed interest rates.

• Forbearance
  An authorized period of time during which the lender agrees to temporarily postpone a borrower's loan repayment obligation. At the borrower's request, an extension of time or smaller monthly payments may be authorized by the lender. Forbearance is granted at the lender's discretion when a borrower demonstrates good intentions of repaying but is temporarily unable to do so. A borrower must request forbearance from the lender. Interest continues to accrue while loans are in forbearance status.

• Free Application for Federal Student Aid (FAFSA)
  The first application to be completed in order to apply for virtually all types of federal financial aid for higher education. This form is distributed and processed by the U.S. Department of Education. It is used in applying for all Federal Title IV student aid programs, including Pell Grants, Stafford Loans and the campus-based programs. The FAFSA collects the information required to determine need and eligibility for financial aid.

• Full-Time Status
  The credit load or hours considered by the school to be full time for a student's course of study. Most schools generally consider full-time enrollment to be at least 12 semester or quarter credits.

• Grace Period
  A specified period of time after a student leaves school or drops below half-time status during which he or she is not required to make payments on either principal or interest on their student loans. The grace period is typically six to nine months, depending on the type of loan. The Federal Subsidized Stafford Loan, for example, has a six-month grace period.

• Graduate PLUS
  Graduate PLUS loans are low-interest education loans specifically for professional and graduate students. These loans can help cover the cost of tuition, books, school supplies and living expenses. Graduate PLUS loans can be used in addition to other forms of financial aid such as Stafford loans.The borrower must have already earned a bachelor's degree in order to qualify for this type of loan. The borrower also must have accepted all available Stafford loans before they are eligible for a Graduate PLUS loan.

• Graduated Repayment Schedule
  An arrangement in which the amount of a borrower's monthly payment increases in a scheduled manner over the term of a loan, permitting smaller monthly payments during the early part of the repayment period, with larger monthly payments due during the latter part of the repayment period.

• Grant
  Financial aid that does not have to be paid back and is awarded to students based on financial need. Grants and scholarships are considered "gift aid" because they do not have to be repaid.

• Guarantor
  A state, regional or national organization that acts as an agent for the federal government in administration and insurance of FFELP loans made by private lenders. Also called "guaranty agency" or "guarantee agency."

• Half-Time Status
  The credit load or hours considered by the school to be half time for a student's course of study. Most schools generally consider half-time enrollment to be no less than 6 semester or quarter credits.

• Income Sensitive Repayment Schedule
  A repayment schedule for some FFELP or FDSL loans under which the borrower's monthly payment amount is adjusted annually, based solely on the borrower's expected total monthly gross income received from employment and other sources during the course of the repayment period. This schedule may be utilized for up to five years. The borrower must qualify each of the five years.

• Independent Student
  A student who is over 24 years of age, married, has dependents, is a veteran of the Armed Forces, is a graduate student, an orphan or a ward of the court.

• Interest
  The fee charged to a borrower for the use of someone else's money, computed as a percentage of what is borrowed. The interest rate may remain constant or can vary throughout the life of the loan. One that remains constant is known as a "fixed" rate. A "variable" interest rate changes at specified times. As of July 1, 2006, all federal loans have fixed interest rates.

• Lender
  The institution that provides the money to be borrowed through the student loan program.

• Level Repayment Schedule
  An installment plan in which each payment is the same throughout the repayment period, adjusted only to reflect annual changes in the loan's interest rate. The final payment of this schedule may be slightly more or less than the regularly scheduled payment amount.

• Origination Fee
  A fee charged by the federal government and deducted from the proceeds of a loan before disbursement. This fee partially offsets the administrative costs of the Federal Family Education Loan and Federal Direct Loan Programs. Lenders may choose to pay this to the federal government on the student's behalf.

• Outstanding Balance
  The total amount of a loan or loans, including both principal and interest, still to be repaid.

• PLUS Loan
  Parent Loans for Undergraduate Students. A student's parents may borrow up to the difference between educational costs and other financial aid received each year from a bank or other lending institution through this program.

• Pell Grant
  A federal program where money is given to students with the highest amount of financial need. Pell Grants do not have to be repaid.

• Principal
  The original loan amount borrowed. Origination and guarantee fees may be deducted from this amount before disbursement. Interest is computed as a percentage of the principal. The borrower pays interest on the outstanding (or remaining) principal each month until the entire loan is paid off.

• Promissory Note
  The legal and binding contract signed between the lender and the borrower which states that the borrower will repay the loan as agreed upon in the terms of the contract.

• Refinancing
  Taking out a new loan to pay off pre-existing obligations. Another name is loan consolidation.

• Renewal FAFSA
  A partially prefilled FAFSA mailed or e-mailed by the U.S. Department of Education to students who completed a FAFSA in the previous year.

• Repayment Disclosure
  Written descriptions of exact terms, conditions and requirements of repayment, including the interest rate and the monthly payment. Repayment disclosure statements are mailed to students by lenders before their loan goes into repayment. Borrowers should retain repayment disclosure statements until the loan is paid in full.

• Repayment Option
  Methods or special features of repayment offered by lenders and other holders of student loans.

• Repayment Period
  The time during which the principal, plus any accrued and capitalized interest, becomes due. This time may be expressed in terms of years or months.

• Repayment Schedule
  A description of the borrower's monthly payment, interest rate, total repayment obligation, due dates and length of time for repaying the loan.

• Scholarship
  An award that does not usually have to be paid back. A scholarship is usually awarded to students who demonstrate or show promise of high achievement in an area such as academics, athletics, music, art or other disciplines.

• Secondary Market
  An organization that purchases loans from lenders in order to allow lenders to make new loans. Some secondary markets are national. Others are state or regional. If your lender sells your loan to a secondary market, you will be advised of the new holder or owner of your loan. Selling loans is a common practice among lenders and does not affect the terms and conditions under which a loan was originally made.

• Servicer
  A company employed by a lender or a secondary market organization to perform administrative duties such as billing and collecting. Regardless of who owns or services your loan, the terms and conditions under which the loan was originally made remain the same.

• Student Aid Report (SAR)
  The form a student receives from the US Department of Education after filing a FAFSA application. The SAR notifies the student of his eligibility for federal student aid. The schools use this to process financial aid packages.

• Subsidized Loan
  A subsidized loan is awarded on the basis of financial need, which is determined by the information provided on the Free Application for Federal Student Aid (FAFSA). For those who qualify for a subsidized loan, the federal government pays interest on the loan (subsidizes the loan) until repayment begins and during authorized periods of deferment thereafter.

• Undergraduate
  A student who has not yet received a bachelor's degree.

• Unsubsidized Loan
  A loan for which the student is responsible for paying the interest that accrues on the loan from the date of disbursement until the loan is paid in full, regardless of enrollment or deferment status.

• Work-Study Program
  Program for part-time employment to undergraduate and graduate students, working on or off campus, to help pay for unmet financial needs for higher education.