Glossary

A

Academic Period
The time frame for which a student is enrolled; usually, it is a semester, quarter, or trimester with specified start and end dates.
Academic Year
The period of time during which a school holds classes. Specific start and end dates support the student's eligibility for a student loan.
Accrued Interest
The amount of interest that accumulates on the unpaid principal balance of a loan. Typically, it is calculated daily.
Adjusted Gross Income
Taxable income from all sources, less IRS-approved adjustments.
Aggregate Loan Amount (Cumulative Loan Amount)
The total amount of loans disbursed to a borrower throughout the student's academic career.
Alternative Loan (Private Loan)
A student loan that is not guaranteed by the federal government. These loans are offered by banks and other lenders to supplement other financial aid and help students meet the full cost of education.
Amortization
The process of gradually decreasing the loan balance through periodic payments of principal and interest over an extended period of time.
Annual Loan Limit
The maximum loan amount allowed by a lender (or a loan program) during a calendar or academic year.
Annual Percentage Rate (APR)
A percentage which represents the annualized cost of credit for a loan including finance charges (interest, fees, and other charges). The APR may be higher or lower than the interest rate.
Assets
Items of financial worth which may include your home, business, savings and checking accounts, stocks, bonds, real estate, trust funds, etc.
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 begins July 1 and ends June 30.
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B

Bankruptcy
Legal action to discharge debts and obligations taken by a person or company under the terms of the Federal Bankruptcy Act.
Borrower
A person who takes the loan in his or her name. Generally, student loans are taken out by the student as the primary borrower with other persons obligated on the loan being designated as cosigners (see the definition of cosigner below).
Bursar's Office
A college or university office responsible for the billing and collection of outstanding funds due to the school.
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C

Campus-Based Aid
Financial aid programs administered by colleges and universities that are funded by fixed annual allocations from the federal government. Examples of campus-based aid include: Federal Perkins Loans and Federal Work-Study Programs.
Cancellation
The act of stopping funds either in full or part from being released to the school or borrower in order to dismiss the borrower from the obligation to repay the cancelled amount. Cancellation can only occur for funds that have not yet been released.
Capitalization
The process of adding the unpaid, outstanding interest to the principal balance of a loan when the borrower postpones paying interest. This will increase the balance due and may increase the monthly payment amount.
Capitalized Interest
The outstanding unpaid interest amount that is added to the principal balance of the loan, thereby increasing the principal balance, the monthly payment amount and the total amount to be paid on the loan.
Collection
Activities such as letters or telephone calls conducted by lenders, guarantors, service providers and collection agencies that attempt to collect money owed when an account becomes delinquent.
College Scholarship Service (CSS) Profile
An application (much more detailed than the FAFSA) distributed by the College Board in the US allowing students to apply for financial aid.
Combined Billing
Having multiple loans with one lender appear on a single monthly statement.
Consolidation
The process of combining multiple education loans into one new loan with a new interest rate, repayment term, and monthly payment amount.
Cosigner
A person who agrees to repay the loan in the event the primary borrower does not.
Cost of Attendance (Cost of Education)
The total amount, determined by the school, a student must pay for one academic year. It includes tuition, room and board, books, supplies, transportation, and personal expenses.
Credit-Based Loans
Loans that are made to borrowers based on their creditworthiness rather than financial need.
Credit Report
Information compiled by consumer reporting agencies that provides a comprehensive view of a borrower's credit history. The credit history includes past and present debt, including a repayment history of listed accounts.
Credit Response
The approval, decline, or counteroffer sent by the lender to the applicant.
Creditworthy
A lender's determination that a credit applicant is likely to repay the loan in accordance with its terms.
Cumulative Loan Amount (Aggregate Loan Amount)
The total amount of loans disbursed to a borrower throughout the student's academic career.
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D

Debt-to-Income Ratio
A calculation used by a lender to determine a person's ability to repay debt.
Default
Failure to make payments or otherwise failing to meet the terms and conditions of the student loan promissory note.
Deferment
A period of time when a borrower is not required to make any payments. During deferment, interest continues to accrue and will be added to the principal balance at the end of the deferment.
Delinquent
The status of a borrower who has failed to pay their debt or financial obligations.
Dependent Student
A student who meets all of the following conditions: is under 24 years of age, is not married, is not a veteran of the US Armed Forces, is not an orphan or ward of the court, has no legal dependents, and whose parents provide for more than half of his or her financial support.
Direct Loan
A federal student loan issued under the William D. Ford Federal Direct Student Loan (Direct Loan) Program.
Direct PLUS Loan
A federal loan that requires a credit evaluation and is available to graduate students and parents of dependent undergraduate students.
Direct Stafford Loan
A federal loan that is available to most students. Stafford Loans may be subsidized (for undergraduate students, based on financial need) or unsubsidized (for undergraduate and graduate students, not based on financial need).
Disbursement
The delivery of all or a portion of the loan funds to the school, the borrower, or other specified party. Student loan disbursements are generally delivered directly to the school and credited to the student borrower's account at the school.
Disclosure Statement
A notification of the actual cost and terms of a loan, which includes the loan amount, interest rate, estimated future finance charges, and other important information.
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E

Economic Hardship
A financial situation where the borrower earns less than the minimum wage or exceeds the federally defined debt-to-income ratio.
Economic Hardship Deferment
A temporary postponement of payment granted to a borrower who meets specific eligibility criteria.
Education Savings Account
A savings account that allows parents and students to save for education expenses. It allows a taxpayer to deposit up to $2,000 per year for each child under the age of 18. Withdrawals from an education savings account will be tax free as long as the withdrawals are used for educational expenses.
Endorser
An endorser is a cosigner on a federal student loan who agrees to be equally responsible along with the parent or graduate student borrower for repayment of the loan. If the borrower fails to repay the loan, the endorser is legally obligated to repay the debt.
Enrollment Status
The course load of a student, generally defined in terms of full-time, half-time, or less than half-time enrollment status.
Entrance Interview (Entrance Counseling)
An in-person or online counseling session with the school's financial aid office before obtaining student loans. This counseling session educates the student on the terms and obligations associated with taking out student loans.
Estimated Financial Assistance
The school's estimate of the amount of financial assistance that a student has been or will be awarded for the enrollment period. It includes assistance from federal, state, institutional, scholarship, grant, financial need-based employment, and other sources.
Exit Interview (Exit Counseling)
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), expects a family to contribute to the cost of a college education based on income, assets, and other circumstances.
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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 Health Care and Education Affordability Reconciliation Act of 2010 prohibits lenders from originating federal student loans under the Federal Family Education Loan Program on or after July 1, 2010.
Federal Interest Subsidy
The federal government's payment of accrued interest on subsidized Stafford Loans to the lender on behalf of the borrower during in-school and deferment periods. For subsidized Stafford Loans with a first disbursement prior to July 1, 2012, the federal government also pays the accrued interest during the 6 month grace period.
Federal Loan
A loan available from the US government.
Federal Supplemental Educational Opportunity Grants
Government grants distributed by colleges, at their discretion, to students based on need.
Federal Work-Study
Part of the Federal Student Financial Assistance Program that provides part-time employment for college students who need income to help meet education costs.
Fellowship
A form of aid given to graduate students to help support their education. Some fellowships include tuition waivers or payments to universities in lieu of tuition. Most fellowships include a stipend to cover reasonable living expenses. Fellowships are a form of gift aid and do not have to be repaid.
Finance Charge
The cost of credit as defined by the Federal Truth-in-Lending Act, includes interest, loan origination fees, points and certain other loan fees. Late fees and returned check fees are not finance charges.
Financial Aid
Assistance provided in the form of grants, scholarships, work-study, and loans to provide funding for an education.
Financial Aid Administrator (FAA)
A staff member at a school who administers financial aid programs.
Financial Aid Office
A department at the school that provides assistance to students and parents about how to pay for school.
Financial Aid Package
The total amount of monetary assistance the student can receive including all grants, scholarships, work-study, and loans available from school, state and federal programs, as listed in a college's financial aid award letter. It does not include private student loans.
Financial Aid Transcript
A record of all federal aid received by a student for each school attended.
Financial Need (Aid Eligibility)
The difference between the total cost of attendance and the expected family contribution.
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)
A standard federal form used to determine the eligibility for most types of financial aid, including federal student loans.
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G

Gift Aid
Financial aid such as grants and scholarships that do not need to be repaid.
Grace Period
A period of time when the student is not required to make student loan payments (usually six or nine months after graduation).
Graduate or Professional Student
A student who is enrolled in a program or course of study above the baccalaureate level at an institution of higher education.
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.
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H

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I

Indebtedness
The amount of money a borrower owes.
Independent Student
A student who is at least 24 years old, married, a graduate or professional student, a veteran or on active duty in the military for other than training or state purposes, an orphan, a ward of the court, or who has legal dependents other than a spouse.
In-School Deferment
A temporary postponement of payments during which the borrower is attending an eligible school at least half-time.
Interest
The amount charged to borrow money over time. Interest is generally stated as an annual percentage of the principal amount owed.
Interest Subsidy
The federal government's payment of accrued interest on eligible federal loans during in-school, grace, and deferment periods.
International Student
A person who is not a US citizen or a permanent resident and who plans to attend or is attending a US college, university, or other post-secondary educational institution.
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J

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K

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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.
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M

Master Promissory Note (MPN)
A Promissory Note that can be used for a single loan and for subsequent loans of the same type.
Matriculate
To enroll as a degree-seeking student at a college or university.
Merit Aid
Financial aid awarded to students based on academic, artistic or athletic achievement.
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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.
Net Amount
The total amount of money sent to the school, borrower or escrow agent by a lender after deduction of any guarantee or origination fees.
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.
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O

Original Loan Balance
The beginning principal balance of a loan, which includes any origination and guarantee fees.
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.
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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.
Pell Grant
One of the largest sources of grants, Pell Grants are distributed by the federal government and are designed to help students with financial need.
Perkins Loan
A campus-based, low-interest education loan for undergraduate and graduate students. The school acts as the lender using a limited pool of funds provided by the federal government. These loans are awarded based on exceptional financial need.
Post-Secondary Education
A term referring to programs at colleges, universities, technical, or vocational schools for individuals extending their education beyond high school.
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 and other lenders to supplement other financial aid and help students meet the full cost of an education.
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.
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Q

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R

Reference
An individual listed on the loan application for the purpose of collecting or verifying borrower information.
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.
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S

Satisfactory Academic Progress (SAP)
An eligibility requirement for borrowers, established by schools, 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.
SEOG (Supplemental Educational Opportunity Grant)
A federally sponsored grant of up to $4,000 awarded to certain Pell Grant recipients who demonstrate exceptional need.
Servicer (Servicing Agency)
An organization that acts on behalf of a lender to perform loan origination, servicing, or collection activities.
Statement
A periodic report that shows account activities such as loan balances, amounts paid, the next payment due date, and the amount due.
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. For subsidized Stafford Loans with a first disbursement prior to July 1, 2012, the federal government also pays the accrued interest during the 6 month grace period.
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T

Term (Repayment Period)
The length of time allowed to repay a loan.
Title IV
A section of the Higher Education Act of 1965, as amended, that authorized federal loan, work and grant education financial assistance programs.
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.
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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.
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V

Variable Interest Rate
An interest rate that may change periodically (e.g., quarterly or annually) through the life of the loan.
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W

W9-S
An IRS form which taxpayers must complete to qualify for possible tax deductions on student loan interest payments.
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X

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Y

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Z

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#

1098-E Eligible
Student loans that are eligible for interest payment deductions when a borrower files their income tax return. Qualified student loans are those incurred solely to pay for qualified higher education expenses while the student was enrolled in school at least half-time. These costs include tuition, fees, room and board, etc.
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