Student Loans & Consolidation Glossary of Common Terms

Academic Year The period of the year during which a college or university is in session. At least 30 weeks in length, generally it spans from August or September to May or

Accrued Interest Interest that accumulates on the unpaid balance on a loan.

Accrual Date The day on which interest begins to accumulate on the unpaid
balance of a subsidized loan.

Adjusted Available Income As related to Federal Methodology, family earnings that remain after the deduction of allowances including taxes.

Amortization Paying off a debt in partial payments rather than in one lump sum.

Appeal As related to student loans, a request that one’s financial aid eligibility or status be reviewed or adjusted.

Asset Protection Allowance Some assets of parents may be left out of Federal Methodology calculations to determine their ability to finance their student’s education. This is to protect parents’ interests, and generally widens in scope as parents’ ages increase.

Award Year The academic year during which financial aid will be disbursed. Eligibility is determined by the Base Year.

Base Year The year before financial aid disbursement that serves as the reference to determine federal financial aid eligibility.

Bursar’s Office The office of a college or university that handles tuition and billing.

Campus-based Aid Federal financial aid that is managed by the student’s college or university, such as Perkins Loans and Work-Study programs.

Compounded Interest Interest that is paid on both the balance of the loan as well as on other interest. Most federal student loans utilize Simple Interest.

Consolidation Combining multiple loans into a single loan, often at a lower interest rate and with smaller monthly payments. Both private student loans and federal loans can be consolidated separately, but private loans and federal loans cannot be consolidated together.

Cooperative Education A program for college students in which they spend part of their time in a professional setting related to their area of study, in addition to their time spent in the classroom.

Cosigner One who signs a loan agreement in addition to the primary borrower, thus agreeing to be held responsible for the loan should the borrower fail to pay.

Cost of Attendance The total monetary cost for a student to attend school. It includes not only tuition and fees, but also expenses such as housing, books and supplies, transportation, loan fees, and personal expenses. It is provided by the individual universities and colleges.

Custodial Parent The parent with whom a child has resided for the past 12 months, if the parents are divorced or separated. College financial aid decisions are based on the finances of this parent.

Department of Education Federal government agency that is responsible for federal financial aid programs including Pell Grants, Perkins Loans, Stafford Loans, parents’ PLUS loans, and the Work-Study program.

Default As related to student loans, the status of a loan if a borrower fails to make several payments in a row, or if he or she violates the terms and conditions of the loan agreement. Legal action many be taken by the lender to obtain payment, and the borrower may not be able to secure student loans in the future.

Deferment Postponing repayment of a loan because the borrower meets certain requirements that allow such action. Among other exceptions, most federal student loans offer deferment for any student taking classes at least half-time.

Delinquency Failure to make monthly payments on a loan on time.

Dependent A person who receives at least half of their financial support from another person with whom they live, other than a spouse. Students who are dependents are assumed to have access to the financial assets of their parents (or legal guardians). This is an important consideration for financial aid eligibility.

Direct Loans Loans under the William D. Ford Federal Direct Loan Program that are funded by the federal government, but that designate the student’s college or university as the lender.

Due Diligence In the event that a student loan borrower fails to make payments or otherwise live up to the conditions of the promissory note, the federal government instructs the lender or servicer to contact the borrower and encourage repayment or make arrangements.

Entitlement A type of financial aid program that awards all applicants who meet the requirements, such as the Pell Grant.

Entrance/Exit Interview Sessions that must be completed by the federal student loan borrower both before a loan is disbursed and before the student graduates.

Expected Family Contribution The amount that the Federal Methodology need analysis formula determines a family should be able to contribute to a student’s education. Taken into consideration are family size, members of the family enrolled in college, taxable and non-taxable income, and other assets. Both expected parent contribution and student contribution are included therein.

Extended Repayment A federal student loan repayment schedule that allows the borrower up to 30 years to repay.

FAFSA Free Application for Federal Student Aid. The application that is used to determine eligibility for federal financial assistance for students.

Federal Methodology The formula that is used by the federal government to determine expected family income for student financial aid. It takes into consideration the size of the family, members of the family enrolled in college, taxable and non-taxable income, and other assets.

Federal Student Loan A student loan provided by the federal government, as determined after the filing of the FAFSA.

Fellowship A type of financial aid for graduate students that waives part or all of due tuition in exchange for some type of work or assistance in return.

Financial Aid Monetary assistance for students and their families to help make education affordable. Some types of aid must be repaid or require something in return, while other types are considered gifts.

Financial Aid Package The total collection of financial assistance a student receives including loans, grants, scholarships, and work-study.

Forbearance A period of time during which a borrower may be allowed to postpone or reduce payments, but still is held responsible for interest charges. Often it is granted due to financial hardship or other unusual circumstances.

Gapping The situation in which the financial aid offered to a student is insufficient to meet the student’s need. Also known as Unmet Need.

Gift Aid Financial aid that does not require repayment or anything in return, such as scholarships and grants.

Grace Period A period of time after graduation (or failing to attend school at least half-time) during which payment is not yet required on student loans. Depending on the loan, it could be six or nine months, and further deferment is possible in certain situations.

Graduated Repayment A federal student loan repayment schedule by which payments start out small and gradually grow larger.

Grant Financial aid based on need that does not requirement repayment.

Gross Income Total earnings before taxes, allowances, or other expenses are deducted.

Income Contingent Repayment A federal student loan repayment schedule in which payment amounts depend on the income of the borrower. The greater one’s income, the larger the monthly payments.

Independent A student who is at least 24 years old, is married, is a graduate or professional student, is a veteran, has a dependent, or is an orphan or ward of the court. He or she lists only his or her own finances (or together with a spouse) on the FAFSA.

Interest A percentage of the loan amount that is charged periodically to the student until full payment is received.

Internship A program in which college students work in supervised professional settings relevant to their course of study. Usually it is an unpaid position.

Loan Forgiveness The federal government may write off one’s student loan debt in certain cases, like in the event of military service, volunteer work, or if one practices medicine or teaches in specified communities.

Merit-based Aid Financial aid that is granted not according to one’s financial need, but because of some academic achievement or talent.

National Student Loan Data System A federal database of students’ federal loans, grants and other financial aid information. Borrowers may access the system to find information on their financial aid.

Need The amount that results when the Expected Family Contribution is subtracted from the Cost of Attendance.

Need-based Aid Financial aid that is granted according to one’s financial need.

Net Income Earnings that remain after all taxes and allowances have been deducted.

Overawards Financial aid that is greater than a student’s financial need. Overawards may not total more than $400 above the student’s financial need.

Parent Contribution Included as part of the Expected Family Contribution, the amount of money the government expects a parent or parents to be able to contribute to a child’s education.

Parent Loans for Undergraduate Studies Federal loans that are available to dependent students’ parents. A credit check is required. Commonly known as PLUS loans.

Pell Grant A federal grant that provides funds to undergraduate students with financial need. Unlike loans, grants do not require repayment.

Perkins Loan A federal loan available to both undergraduate and graduate students that offers one the lowest interest rates available. It is managed by the student’s educational institution itself and is provided to students with financial need. Those who have applied for a Pell Grant are eligible.

Prepaid Tuition Plan A plan to pay for college in which a savings fund grows at the same rate as tuition rates. For example, if someone invests in a year’s worth of tuition today, that investment still will be worth a year’s worth of tuition five years from now, no matter how much tuition has increased.

Principal The amount of a loan that has not yet been paid. It does not include interest, but rather is the balance on which interest is based.

Private Student Loan A student loan provided by some source other than the federal government.

Promissory Note A legal document between a lender and a borrower by which the borrower commits to repayment of the loan, as well as all relevant terms and conditions. It must be signed before the disbursal of any federal loans.

Renewable Scholarship A scholarship that is offered to a borrower for more than one academic year. Often certain conditions must be met for the scholarship to be disbursed subsequent years.

Research Assistantship A type of financial aid for graduate students that waives part or all of due tuition in exchange for research work.

Satisfactory Academic Progress In order to continue to receive financial aid, a student must maintain an adequate academic standing consistent with the college or university’s rules.

Scholarship A type of financial aid for undergraduate students that does not need to be repaid. They may be merit- or need-based, but most are geared toward students in certain areas of study, in certain extracurricular activities, from certain areas, or with certain interests.

Selective Service Registration for the draft that must be completed by males age 18 and over. In order to be eligible for federal financial aid, one must be registered with the Selective Service.

Self-help Aid Financial aid that requires repayment or something in return, such as work-study or loans.

Simple Interest Interest is due on the unpaid balance of a loan, but not on any accrued interest. Most federal student loans utilize this type of interest.

Stafford Loans Federal loans of which there are two different types: subsidized loans are granted to students with financial need, while unsubsidized loans have no such restrictions.

Student Contribution Included as part of the Expected Family Contribution, the amount of money the government expects a student to be able to contribute to his or her own education.

Subsidized Loan A federal loan for which the government pays the interest while the student is in school, during the grace period, and during deferment. It is based on financial need. Examples include the Perkins Loan and the subsidized Stafford Loan.

Teaching Assistantship A type of financial aid for graduate students that waives part or all of due tuition in exchange for teaching work.

Unmet Need The situation in which the financial aid offered to a student is insufficient to meet the student’s need. Also known as Gapping.

Unsecured Loan A loan that is not secured against private property. Student loans are unsecured.

Unsubsidized Loan A federal loan for which the government does not pay any interest. The borrower is responsible for interest payments from the time the loan is disbursed, and financial need has little bearing on loan approval.

Work-Study A type of federal financial aid in which undergraduate and graduate students receive compensation that is partially funded by the government in exchange for work.

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