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Glossary
Unsure of some of the student loan terminology on this Web
site? We can help. Simply click on the letter below that
corresponds to the first letter of the word you want to
look up.
A B
C D E
F G H
I L M
N O P
R S T
U V W
A
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Academic Year
Time in which a full-time student should complete two semesters,
two trimesters, or three quarters at a college, university,
technical or vocational school.
Accrued Interest
If you postpone repaying the interest on your loan, it will
accumulate - accrue - alongside the balance. The accrued
interest will be CAPITALIZED (added to your loan balance),
so you pay interest on the interest. Under federal regulation,
for loans disbursed on or after 10/1/98, a lender may only
capitalize accrued interest at the end of the grace period,
at the end of deferment or forbearance, or when the borrower
defaults.
Adjusted Gross Income (AGI)
A figure taken from IRS Form 1040, 1040A, or 1040EZ that
represents all taxable income minus IRS allowable adjustments
to income.
Aggregate Maximums
The total amount you may borrow through subsidized and unsubsidized
Federal Stafford loans is limited. The aggregate maximum
is based on whether you are in an undergraduate or graduate
program and whether you are a dependent or independent student.
The aggregate maximums are:
Undergraduate program
Dependent student $23,000
Independent student $46,000 (up to $23,000 may be subsidized)
Graduate program (includes undergraduate
borrowing)
Independent student $138,500 (up to $65,500 may be
subsidized)
Application and Promissory Note (A/PN)
A single document which serves as the Federal PLUS loan
application, as well as the Promissory Note (see Promissory
Note definition).
Assets
Property or resources which have a monetary value. For example,
cash on hand in checking and savings accounts, trust, stocks,
bonds, and other securities, real estate, income-producing
property, business equipment, and business inventory are
considered assets.
Award Letter/Financial Aid Notification
The official document issued by a school's financial aid
office to detail all financial aid awarded to a student.
It also covers terms and conditions for the financial aid
and information about cost of attendance. Award information
is based on enrollment, housing status, any additional aid
received and any other changes that affect your cost of
attendance.
Award Year
The period of time between July 1st of one year and June
30th of the next year.
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Base Year
For need analysis purposes, the base year is the calendar
year preceding the award year. For instance, 2003 is the
base year used for the 2004-2005 award year. The Free
Application for Federal Student Aid (FAFSA) uses family
income from the base year because it is more accurate and
easier to verify than projected year income.
Budget
The estimated cost of attendance for an institution which
usually includes tuition and fees (including loan fees),
books and supplies, room and board, personal expenses, and
transportation. Other living expenses may be included.
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Campus-Based Programs
The Federal Perkins Loan, Federal Supplemental Educational
Opportunity Grant (FSEOG), and Federal Work-Study (FWS)
programs. These three programs are called "campus-based"
because the funds are administered directly by the school's
financial aid office, which awards these funds to students
using federal guidelines.
Capitalization
Unpaid interest is added to the principal balance of your
loan. As a result, you will pay more interest over the life
of the loan. Your monthly payment amount may be higher or
your repayment period could be longer.
Capitalized Interest
Accrued interest that is added to your balance - so you
pay interest on the interest. Under federal regulation,
for loans disbursed on or after 10/1/98, a lender may only
capitalize accrued interest at the end of the grace period,
at the end of deferment or forbearance, or when the borrower
defaults.
Central Processing System (CPS)
The U.S. Department of Education's processing facility for
application data. The CPS receives student information from
the application processors, calculates a student's official
EFC, performs several eligibility database matches, prints
the Student Aid Report (SAR) that is mailed to the
applicant and produces Institutional Student Information
Records (ISIRs) that are sent to the colleges.
Class Rank
The student's position within his/her graduating class,
typically determined based on Grade Point Average.
Consolidation Loan/Direct Consolidation Loan
There are two categories of consolidation loans-Federal
Family Education Loan Program (FFELP) Consolidation Loans
and Direct Consolidation Loans. Both allow the borrower
to combine different types and amounts of federal student
loans to simplify repayment. A consolidation loan pays off
the existing loans; the borrower then repays the consolidation
loan.
Cost of Attendance (also known as Cost of Education)
The student's cost of attendance includes not only tuition
and fees (including loan fees), but the student's living
expenses while attending school. The cost of attendance
is estimated by the school, within guidelines established
by federal regulation.
Note that the cost of attendance for the
Federal Pell Grant Program is different from the cost of
attendance in the other student financial aid programs.
The cost of attendance is compared to the student's expected
family contribution to determine the student's need for
financial aid.
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Default
Failure to repay your loan according to the terms agreed
upon in the promissory note.
Deferment
A period of time during which your repayment obligation
is temporarily postponed for an authorized reason. Borrowers
whose interest was paid by the federal government while
in school will qualify for these same interest benefits
during deferment periods.
Dependent Student
A student that does not meet the following criteria:
- is 24 years old
- is a veteran of the U.S. Armed Forces
- is an orphan or is a ward/dependent of the court or
was a ward/dependent of the court until age 18, or both
of his or her parents are deceased
- has children who receive more than half of their support
from student
- has legal dependents (other than a spouse or children)
who live with the student and receive more than half of
their support from student
- is married as of the date of completion of the FAFSA
- is working on a master's or doctorate program in the current academic year
Disbursement/Disbursed
Loan funds issued by the lender to the student. Loan funds
are typically made in multiple installments by check or
electronic funds transfer.
Distance Learning
Courses offered by correspondence and/or telecommunications
(e.g., videoconferencing, Internet).
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Economic Hardship
Many Peace Corps volunteers qualify for deferment based
on economic hardship.
ED
Abbreviation for the U.S. Department of Education.
Electronic Funds Transfer (EFT)
A process by which student loan proceeds are electronically
disbursed directly from the lender to the school, and the
school then applies the funds against the student's account
at the school. This eliminates the need for individual checks
for student loan disbursements.
Electronic Signature
Information or data in electronic form, attached to or logically
associated with an electronic record, and executed or adopted
by a person or an electronic agent of a person, with the
intent to sign a contract, agreement, or record.
Enrollment Status
The number of credit hours being attempted by a student.
Normally, students must be at least half-time to apply for
financial aid. Individual programs will list this criteria.
Estimated Financial Assistance
For the Federal Family Education Loan Program (FFELP), the
amount of student financial aid the student can expect from
federal, state, school, or other sources, including grants,
loans or need-based work programs.
Expected Family Contribution (EFC)
The amount, determined by a formula Congress established,
that a student's family is expected to contribute toward
the cost of attendance, based on the family's income and
assets. The EFC for the Federal Pell Grant, Campus-Based
and Federal Stafford loan programs is used to calculate
awards. The EFC is printed on the front of the Student
Aid Report (SAR) that is sent to the applicant, and
is also included in the Institutional Student Information
Record (ISIR) that is sent to the college.
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Federal Family Education Loan Program
(FFELP)
The Federal Family Education Loan Program (FFELP) was formerly
known as the Guaranteed Student Loan (GSL) Program. The
FFELP program includes Federal Stafford Loans (subsidized
and unsubsidized), Federal Parent Loan for Undergraduate
Students (PLUS), and Federal Consolidation Loans. Funds
for these programs are provided by private lenders and the
loans are guaranteed by federal government.
Federal PLUS Loan
A federal loan program which provides variable interest
rate loans to eligible parents of dependent students. The
variable interest rate will not exceed 8.25%, 9%, 10% or 12% (depending
on when the loan was originally disbursed) and is adjusted
annually.
Federal Stafford Loan
A program in which a student may borrow a variable rate
long-term educational loan from a financial institution.
There are two types of loans in this program; a subsidized
and an unsubsidized Federal Stafford loan (see the definition
of each loan). The variable interest rate on both loans
will not exceed 8.25% and is adjusted annually.
Federal Work-Study
A need-based program for undergraduate and graduate students.
The program provides approximately 10-20 hours of part-time
employment per week. Hourly wages vary according to position
but must meet at least the minimum wage requirements.
Financial Aid Package
The total financial aid awarded to a student from a combination
of two or more forms of financial aid (grants, scholarships,
employment, and/or loans).
Financial Need
The difference between the estimated cost of attendance
at a school and the amount you and your family can reasonably
be expected to contribute toward your educational expenses,
your expected family contribution (EFC). Financial need
is determined by your school.
Forbearance
A period of time during which a borrower's principal repayment
obligation is temporarily postponed for a mutually agreed
upon reason between the borrower and lender. Payment of
interest which accrues on the account continues to be the
responsibility of the borrower.
Free Application for Federal Student Aid (FAFSA)
The federally-approved application completed by the student,
that collects household and financial information to be
used to calculate the Expected Family Contribution (EFC),
and to apply for federal and state financial aid programs.
The completion of an institutional application may also
be required of the student.
Full-time Students
An enrolled student who is carrying a full-time academic
work load (other than correspondence courses) as determined
by the institution and which is applicable to all students
enrolled in a particular program.
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Gift Assistance
Student assistance funds in the form of a scholarship, grant
or tuition waiver. This type of financial aid does not have
to be repaid.
Grace Period
The period of time between when the student ceases at
least half-time study and when the student must begin to
repay the loan in regular monthly installments. Grace periods
may be either 6 or 9 months depending on when the loan was
originated.
Grade Point Average
The average grade earned throughout a student's applicable
secondary or postsecondary education program.
Graduate Fellowship
The graduate fellowship program must be approved by the
U.S. Department of Education.
Grants
Awards based on financial need or other special requirements
and do not need to be repaid when school is completed.
Guaranty Agency
A state, regional, or national organization that insures
Federal
Family Education Loans made by lenders.
Guarantee and Loan Disclosure Statement
This document specifies the terms and conditions of your
loan, and discloses the amount of funds you will receive.
It also includes the amount of origination and guarantee
fees that will be deducted from your loan proceeds.
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Half Time
Most financial aid programs require a student to be
enrolled at least half-time to be eligible for aid. A student
must usually be taking at least half of the course load
of a full-time student to be considered half-time. Check
with your school for their specific
requirements.
Higher-EdNet
This is ISAC's postsecondary financial assistance location
service. This service assists students in finding alternative
sources to fund their education.
Holder
The institution with legal title to a borrower's loan. The
holder may be the lender that originally made the loan,
a secondary market or another lender to
which the lender has sold the loan, or in the event of a
default, the guaranty agency or the federal government.
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Independent Student
Students who are not dependent on their parents for financial
support. Under the federal definition for the current academic year
academic year, an independent student is one who meets one
of the following criteria:
- is 24 years old
- is a veteran of the U.S. Armed Forces
- is an orphan or is a ward/dependent of the court or
was a ward/dependent of the court until age 18, or both
of his or her parents are deceased
- has children who receive more than half of their support
from student
- has legal dependents (other than a spouse or children)
who live with the student and receive more than half of
their support from student
- is married as of the date of completion of the FAFSA
- is working on a master's or doctorate program in the current academic year
Institutional Student Information Record
(ISIR)
A federal output record sent to the school, which contains
the EFC and all the information provided by the student
on the FAFSA.
Insurance Premium/Guarantee Fee
A guarantee agency charge, not to exceed 1% of the loan
amount, which is deducted from the loan proceeds of each
loan prior to disbursement.
Interest Benefits
The interest payment made by the federal government
to the lender on behalf of an eligible subsidized Federal
Stafford borrower during the in-school, grace, deferment
and post-deferment grace periods.
Interest Rate
Refer to Variable Interest Rate.
Interim Status
The status of those loans which have not yet entered repayment.
Interim status includes the in-school period during which
a borrower is continually attending school on at least a
half-time basis and during the student's 6 or 9-month grace
period. The federal government will pay interest benefits
on eligible subsidized Federal Stafford loans during this
time.
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Loans
A form of financial aid that must be repaid with interest.
Loans provide monetary assistance through participating
lenders, colleges, the federal government, and other organizations.
Loan funds are to be used for educational purposes and must
be repaid.
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Mandatory Fees
The charges assessed by an institution to each and every
full-time student for each term. Application, graduation,
laboratory, breakage, add/drop fees, and program administration
fees for out-of-state or foreign study are specifically
excluded. For the purposes of ISAC's rules, tuition is not
a mandatory fee.
Master Check
The Master Check process enables lenders to submit one check
to a school for all borrowers receiving a disbursement at
that institution, instead of individual checks. The funds
for individual students cannot be moved from the school's
restricted account to the student's individual account if
the borrower has not authorized the movement of funds.
Master Promissory Note (MPN)
A legally binding contract that obligates you to repay a
loan. A signed Federal (MPN) may allow you to borrow additional
loans, based on the same MPN, each year, for up to ten years.
This eliminates the need to complete a new loan application
each year, provided you borrow again within twelve months.
Whether you receive loans under an MPN for only one academic
period (or for multiple academic period) depends on the
school you are attending.
Multiple Disbursement -The procedure by which disbursement
of student loan funds is made in more than one installment,
as required by federal regulations.
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Need Analysis
The process of analyzing the household and financial information
on the student’s financial aid application and calculating
the amount the family can be expected to contribute to educational
costs. For the federal student assistance programs, the
need analysis system is defined by law and results in a
number known as the Expected Family Contribution.
New Borrower
One who has no outstanding (unpaid) loan balances on the
date the promissory note is signed.
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Origination Fee
A fee deducted from the loan proceeds before disbursement
to offset administrative costs of the Federal Family Loan
Program.
Overaward
Generally, any campus-based or loan funds disbursed in excess
of the student's financial need (the overaward concept does
not apply to the Federal Pell Grant Program because it is
an entitlement program.)
Overpayment
Any payment of financial aid that exceeds the amount for
which a student was eligible. An overpayment may be the
result of an overaward, an error in cost of attendance or
Expected Family Contribution (EFC), or a student not meeting
any other eligibility criterion, such as citizenship or
enrollment in an eligible program.
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Parents' Contribution
The financial amount that parents are expected to contribute
to meet postsecondary educational expenses, based on the
need analysis formula.
Personal Identification Number (PIN)
A code or password, unique to or associated with, a specific
user, and entered into a data-processing device for purpose
of verifying the identity of a person requesting a transaction
or access to a system.
Principal
The loan amount borrowed.
Priority Consideration Date
The last date by which an application will be deemed "on-time"
and guaranteed to be considered for full-year eligibility.
Professional Judgment
The financial aid administrator's ability to make changes
or adjustments to a student's financial aid package based
on extenuating circumstances.
Promissory Note
A binding legal document that the
borrower signs when obtaining a loan and on which the borrower
promises to repay the loan, with interest, in specified
installments. The promissory note also includes information
about the grace period, deferment or cancellation provisions,
and the student's rights and responsibilities with respect
to that loan.
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Rehabilitation Training
The rehabilitation training program must be approved by
the U.S. Department of Education and you must have a disability.
Renewal Applicant
Any individual who requests consideration (for a scholarship,
grant, tuition waiver, guaranteed or alternative loan) for
a subsequent period of enrollment after, in a previous period
of enrollment, being awarded and receiving funds from the
same program for which they are now requesting consideration.
Renewal FAFSA
A simplified reapplication form for continuing students.
The Renewal FAFSA allows the student to update the financial
information and other items that have changed from the prior
year's FAFSA, rather than completing the entire FAFSA for
each award year.
Resources
The amount of student financial aid the student may expect
from federal, state, school, or other sources. The school
must consider this available assistance to determine eligibility
for campus-based funds.
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Satisfactory Academic Progress
Some financial aid can be taken away if a student is not
making measurable progress towards the completion of a course
of study. In order to qualify for renewal of financial aid,satisfactory
academic progress must be maintained.
Scholarships
Awards based on academic, merit-based, athletic factors,
or various other talents. Financial need is generally not
a factor in determining eligibility, and scholarships do
not usually have to be repaid.
Secondary Market
A company that buys student loans from lenders. The company
holds and services loans until the loans are paid. The
company usually cannot originate new loans, so the borrower
needs to stay in touch with the lender to obtain a future
loan. The company may employ a servicer (billing agent)
to process a borrower’s regular loan payments.
Servicer
A company contracted by a lender or holder to perform the
administrative tasks such as processing the loan and collecting
payments, that are associated with educational loans.
Standard Repayment
Most student loan payments are set up on a standard repayment
plan with monthly payments that remain constant throughout
the repayment period.
State of Legal Residency (or, Residency)
The state in which your true, fixed, and permanent home
is located. For dependent students, the state of legal residence
is usually the state in which your parents live.
Student Aid Report (SAR)
The federal “output document” printed by a FAFSA
processor and mailed to the student. The SAR contains the
family’s financial and other information reported
by the student on the financial aid application. The student’s
eligibility for aid is indicated by the EFC printed on the
front of the SAR. Schools that participate in the Electronic
Data Exchange and other services offered by the U.S. Department
of Eduction can receive the information on the SAR through
these services.
Subsidized Federal Stafford Loan
A variable low interest rate loan based on financial need.
The federal government will pay the interest while the student
is in-school, during the grace period and authorized deferment
periods. The variable interest rate will not exceed 8.25%
and is adjusted annually.
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Taxable Income
Income earned from wages, salaries, tips, as well as interest
income, dividends, alimony, estates or trust income, business
or farm profits, and rental or property income.
Title IV Assistance
Monetary awards provided per Title IV (Student Financial
Assistance) of the Reauthorization of the Higher Education
Act of 1965.
Transcript
All classes taken and all grades received by a student.
An official transcript is sent by the school with an original
signature of a school official.
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Unemployment
- You must be conscientiously seeking, but unable to find,
full-time employment.
- If you are receiving unemploment benefits that will
automatically qualify you for the unemployment deferment.
No form is required but you need to call your lender.
Unmet Need
The difference between a specific student's total available
resources and the total cost for the student's attendance
at a specific institution.
Unsubsidized Federal Stafford Loan
A low variable interest rate loan not based on financial
need. This loan is available for students who are not eligible
or only partially eligible for a subsidized Federal Stafford
loan or for independent students borrowing at the higher
loan limits. The student is responsible for paying the interest
from the date the loan is disbursed. Repayment of principal
begins six months after the student graduates or ceases
to be enrolled on at least a half-time basis. The variable
interest rate will not exceed 8.25% and is adjusted annually.
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Variable Interest Rate
An interest rate which changes at specified times over the
life of a loan. Refers to the rate of interest on the Federal
PLUS and Federal SLS Loan Programs, as well as the current
interest rate for the Federal Stafford Loan Program.
Verification
A procedure whereby the school checks the information the
student reported on the financial aid application, usually
by requesting a copy of the tax returns filed by the student,
and if applicable, the student’s spouse and parent(s).
Many schools conduct their own form of verification. In
addition, schools must verify students selected through
the federal central processing system, following the procedures
established by regulation. The FAFSA processor will print
an asterisk next the the EFC (on the Student Aid Report)
to identify students who have been selected for verification.
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William D. Ford Federal Direct (Direct
Loan) Loan Program
A program that allows participating schools to administer
subsidized and unsubsidized Federal Stafford and Federal
Direct PLUS loans directly to student and parent borrowers.
Direct loans have very similar terms and conditions to FFELP
loans. Funds for these programs are provided by the federal
government.
Work Study Program
The Federal Work-Study Program provides jobs for undergraduate
and graduate students with financial need, allowing them
to earn money to help education expenses. Federal Work-Study
will be at least the current federal minimum wage. Your
total Federal Work-Study award depends on when you apply,
your level of need, and the funding level of your school.
When assigning work hours, your employer or financial aid
administrator will consider your class schedule and your
academic progress.
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