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.

Accrued Interest

The amount of interest that has accumulated on the unpaid principal balance of a loan. Typically, interest is calculated on a daily basis.

Adjusted Gross Income (AGI)

Gross income minus certain adjustments. Please see IRS.gov for more information.

Aggregate Loan Amount (Cumulative Loan Amount)

The total amount of student loan debt a borrower has.

Aggregate Loan Limit (Cumulative Loan Limit)

The maximum total loan amount that can be borrowed throughout a student’s academic career.

Amortization

The process of scheduling out a fixed-rate loan into equal payments. A portion of each installment covers accrued interest and the remaining portion goes toward the loan principal.

Annual Loan Limit

The maximum amount of money that can be borrowed from a loan program per year (calendar or academic year).

Annual Percentage Rate (APR)

The cost of borrowing money on a yearly basis, expressed as a percentage rate. The APR may be higher or lower than the interest rate.

Assets

Items of economic value that may include a person’s home, business, savings and checking accounts, stocks, bonds, real estate, and trust funds.

Award Letter

An official document issued by a school's financial aid office listing all the financial assistance a student is eligible to receive, which may include grants, scholarships, federal student loans, and work-study.

Award Year

The academic year in which financial aid is applied to. It begins July 1 and ends June 30.

B

Bankruptcy

Legal action that helps people or companies discharge their debts and repay their creditors.

Borrower

A person who takes the loan in their name and is responsible for repaying the loan. Generally, student loans are taken out by the student who is generally referred to as the primary borrower with any other persons obligated on the loan being referred to as cosigners. For parent loans, the parent or other creditworthy individual is the primary borrower though the student is the beneficiary of the loan.

Bursar's Office

A college or university office responsible for the billing and collection of outstanding funds due to the school.

C

Campus-Based Aid

Financial aid programs administered by colleges and universities that are funded by fixed annual allocations from the federal government, such as Federal Work-Study Programs.

Cancellation

The act of stopping funds either in full or part from being released to the school or borrower to dismiss the borrower from the obligation to repay the canceled amount. Cancellation can only occur for funds that have not yet been released. Loan forgiveness can also be considered cancellation.

Capitalization

The process of adding the unpaid interest to the principal balance of a loan when the loan enters repayment following periods of deferment, grace, and forbearance. This may increase the principal balance on the loan, the amount of the monthly payment, and the total cost of the loan.

Capitalized Interest

Unpaid interest that was added to the principal balance of the loan when the loan enters repayment following periods of deferment, grace, and forbearance. This may increase the principal balance of the loan, the amount of the monthly payment, and the total cost of the loan.

CME Term SOFR

CME Term SOFR (Secured Overnight Financing Rate) is an interest rate index based on market expectations. The variable rate for student loan applications received on or after November 14, 2021, is based on 3-Month CME Term SOFR index. 3-Month CME Term SOFR is a rate index based on what the market expects rates to be over the next 3-month time period. For more information on CME Term SOFR, visit CME Group.

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 online application administered by the College Board® and used by scholarship programs and colleges to award non-federal institutional aid to students.

Combined Billing

Having multiple loans with one lender appearing on a single monthly statement.

Consolidation

The process of combining multiple student loans into one new loan with a new interest rate, repayment term, and monthly payment amount.

Cosigner

An individual who signs the promissory note of a primary borrower as support for the credit of the primary borrower and in doing so, becomes equally responsible for the repayment of the debt. A cosigner accepts equal responsibility for the repayment of a private student loan. A relative, family friend, or creditworthy adult can cosign as long as they meet the lender's cosigner eligibility requirements.

Cost of Attendance (Cost of Education)

The total amount, determined by the school, a student must pay for one academic year. It can include tuition and fees, room and board, books, supplies, transportation, and personal expenses.

Coverdell Education Savings Account (ESA)

A savings account that allows families to save for education expenses. It is only available for families below a certain income level based on their adjusted gross income. It allows a taxpayer to deposit up to $2,000 per year for each child who is 18 years old or younger. Withdrawals from an education savings account will be tax free as long as the withdrawals are used for educational expenses.

Credit-Based Loans

Loans that are made to borrowers based on their creditworthiness rather than financial need.

Credit Report

A summary of your credit activity and current credit situation such as loan paying history and the status of your credit accounts.

Credit Response

The approval, decline, or counteroffer sent by the lender to the applicant.

Credit Score

A number based on a snapshot of a borrower’s credit report. Lenders may use a credit score to determine an applicant’s eligibility for a loan.

Creditworthy

A lender's determination that a credit applicant is likely to repay the loan in accordance with its terms.

D

Debt-to-Income (DTI) Ratio

A calculation used by a lender to determine an applicant’s ability to repay debt. It is calculated by dividing an applicant’s monthly debt payments by their gross monthly income.

Default

A loan goes into default after a prolonged period of nonpayment (i.e., delinquency).

Deferred Repayment Period

Period of time between the first and the final disbursement for a parent loan. During this period, the loan is accruing interest, but the borrower is not required to make payments. Unlike a deferment, the interest accrued during this period will not capitalize.

Deferment

A temporary postponement of loan payments for a specific period tied to a qualifying event like being enrolled in school at least half-time or being on active military duty. During deferment, interest continues to accrue and any unpaid interest will be added to the principal balance at the end of the deferment period (i.e., capitalization). This may increase the principal balance of the loan, the amount of the monthly payment, and the total cost of the loan.

Delinquent

A loan becomes delinquent after failure to make loan payments by a specified date.

Direct Loan

A federal student loan issued under the William D. Ford Federal Direct Loan Program. Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans are types of Direct Loans.

Direct PLUS Loan

A federal student loan that requires a credit evaluation and is available to graduate students and parents of dependent undergraduate students.

Direct Stafford Loan

A federal student loan that was available to most students from 1965 to 2010. Stafford Loans, also known as FFEL Loans, were subsidized (for undergraduate students, based on financial need) or unsubsidized (for undergraduate and graduate students, not based on financial need). Direct Stafford Loans have not been originated since July 1, 2010.

Disbursement

The delivery of all or a portion of the loan funds to the school, the borrower, or other specified party by the lender.

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. Also known as a Truth-in-Lending Disclosure.

E

Economic Hardship Deferment

A temporary postponement of payment granted to a borrower who meets specific eligibility criteria.

Enrollment Status

The course load of a student reported by the school, generally defined in terms of full-time, half-time, less than half-time, withdrawn, or graduated.

Entrance Counseling

An online counseling session required before obtaining federal student loans. This counseling session educates the student on the terms and obligations associated with taking out federal 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 academic period. It includes federal, state, and institutional assistance like scholarships, grants, financial need-based employment, student loans, and other sources.

Exit Counseling

An online counseling session required before graduating, withdrawing, or enrolling less than half-time from school to review the terms and obligations of federal student loans.

Expected Family Contribution (EFC)

The estimated amount the federal government, through the FAFSA® (Free Application for Federal Student Aid), that schools use to calculate how much financial aid a student may be eligible to receive from that particular school. It is not the amount the student will have to pay for college. Beginning with the 2024–25 academic year, the EFC was replaced by the Student Aid Index (SAI).

F

FAFSA (Free Application for Federal Student Aid)

A form students and their parents fill out to apply for federal student aid. It is used to determine the eligibility for federal financial aid, including grants, scholarships, work-study, and federal student loans.

FAFSA Submission Summary

Previously known as the Student Aid Report (SAR), the FAFSA Submission Summary is an electronic or paper document that provides basic information about a student’s eligibility for federal student aid and summarizes their answers to the questions on the FAFSA (Free Application for Federal Student Aid).

Federal Family Education Loan (FFEL) Program

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 private lenders, guaranteed by guaranty agencies, and ultimately insured by the federal government. No new FFEL loans have been originated since July 1, 2010.

Federal Interest Subsidy

The federal government's payment of accrued interest on Direct Subsidized Loans during in-school, grace, and deferment periods.

Federal Student Loan

A student loan available from the US Department of Education to help pay for education expenses.

Federal Supplemental Educational Opportunity Grants (FSEOG)

A federally funded grant awarded by colleges to undergraduate students with exceptional financial need.

Federal Work-Study

A form of need-based federal aid that allows college students to earn money through part-time employment to help pay for education expenses.

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 consumer credit as a dollar amount as defined by the Federal Truth-in-Lending Act. It includes interest, loan origination fees, points, and other certain types of loan fees. Late fees and returned check fees are not finance charges.

Financial Aid

Money given in the form of grants, work-study, loans, and scholarships to help pay for post-secondary tuition and fees, as well as related expenses such as room and board, books, supplies, and transportation.

Financial Aid Administrator (FAA)

A staff member at a school who administers financial aid programs.

Financial Aid Office

A department at a school that provides assistance to students and parents about how to pay for school.

Financial Aid Package

The total amount of monetary assistance a student is eligible to receive including 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 (COA) at a school and the Student Aid Index (SAI), formerly Expected Family Contribution (EFC). Some types of financial aid are determined by financial need.

Fixed Interest Rate

An interest rate that remains the same for the life of the loan.

Forbearance

A temporary postponement of loan payments for borrowers experiencing financial hardship. During forbearance, interest continues to accrue and any unpaid interest will be added to the principal balance at the end of the deferment period. This may increase the principal balance of the loan, the amount of the monthly payment, and the total cost of the loan.

Forgiveness

The act of dismissing the borrower from the obligation to repay some or all of a loan.

FSA ID

An account username and password used to access the US Department of Education’s online systems and sign the FAFSA electronically.

G

Gift Aid

Financial aid such as grants and scholarships that do not need to be repaid.

Grace Period

A period of time when a student is not required to make student loan payments. This typically starts after a student graduates or drops below half-time enrollment, and lasts six or nine months.

Graduate or Professional Student

A student who is enrolled in a program or course of study above the bachelor’s level at an institution of higher education.

Grant

A form of financial aid, similar to a scholarship, that does not have to be repaid.

Gross Monthly Income

Income from employment and other sources, before taxes and other deductions.

H

I

Indebtedness

The amount of money a borrower owes.

In-School Deferment

A temporary postponement of loan payments during which the borrower is attending an eligible school at least half-time. During in-school deferment, interest continues to accrue and any unpaid interest will be added to the principal balance at the end of the deferment period. This may increase the principal balance of the loan, the amount of the monthly payment, and the total cost of the loan.

Interest

The fee charged by a lender, paid by a borrower, to borrow money. The interest is repaid over the life of the loan and is generally stated as a percentage of the principal amount owed.

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.

J

K

L

Lender

A private or public entity that extends funds to borrowers.

LIBOR (London Inter-Bank Offer Rate)

The interest rate banks charge each other for loans. LIBOR is used as an interest rate index (retired June 30, 2023—see USD IBOR Consumer Cash Fallback).

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 fixed period of time.

Loan Balance

The total unpaid amount of a 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. This is different than the Repayment Term.

M

Matriculate

To enroll as a degree-seeking student at a college or university.

Merit Aid

A form of financial aid that does not consider a student’s financial need. Merit-based aid is awarded to students based on academic or extracurricular achievements.

N

National Student Clearinghouse

A non-profit organization that provides secondary and post-secondary educational reporting, data exchange, verification, and research services. It includes degree and enrollment verification that many lenders and servicers use for student loan servicing.

Need Aware

Need-aware colleges consider a student’s ability to pay for college when making admissions decisions.

Need Blind

Need-blind colleges do not consider a student’s ability to pay for college when making admissions decisions.

Needs Analysis

The process that determines a student’s need for financial assistance. The process evaluates the total cost of attendance (COA) at a school compared to the Student Aid Index (SAI), formerly Expected Family Contribution (EFC), to provide financial aid options to cover the remaining education expenses.

Net Amount

The total amount of loan money sent to the school or borrower by a lender after deducting any fees.

National Student Loan Data System (NSLDS)

A centralized database that stores information from schools and guarantors about federal student loans and other US Department of Education programs, such as the Pell Grant.

O

Origination

The processing of a loan application from review and approval through final disbursement.

Origination Fee

A fee paid by the borrower to cover loan processing costs. Origination fees are calculated as a percentage of the loan amount.

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 fees.

Pell Grant

A federally funded grant awarded to undergraduate students with exceptional financial need.

Perkins Loan

A low-interest federal loan for undergraduate and graduate students with exceptional financial need. The school acted as the lender using funds provided by the federal government. The federal Perkins Loans program ended in September 2017.

Post-Secondary Education

The education level that follows the completion of high school. Post-secondary education includes programs at colleges, universities, technical, and vocational schools.

Prepayment

The act of paying off a loan in part or in full before the payment is due. Prepayment can reduce the interest paid over the life of the loan. There is never a penalty for prepaying federal or private student loans.

Prime Rate

The Prime Rate, as published in The Wall Street Journal, is the interest rate banks charge their most creditworthy customers.

Principal Balance

The original or unpaid amount of a loan upon which interest is calculated. It may include capitalized interest.

Private Parent Loan

A parent loan that is provided by private lenders, banks, or other financial institutions where the primary borrower is the parent or other creditworthy individual and not the student. This loan supplements other financial aid and help students meet the full cost of higher education expenses.

Private Student Loan

A student loan that is provided by private lenders, banks, or other financial institutions where the student is the primary borrower. This loan supplements other financial aid and help students meet the full cost of an education.

Promissory Note

A legal document in which a borrower (and cosigner, if applicable) agrees to the terms and conditions of a private loan.

Q

R

Reference

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

Repayment Period

The fixed amount of time the borrower is scheduled to repay the principal balance and interest on a loan (also known as a loan term or term).

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 any finance charges.

S

Satisfactory Academic Progress (SAP)

The successful completion of coursework toward a degree or certificate. To be eligible for federal student aid, a student must meet the SAP standards established by their school.

Scholarship

A form of financial aid 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.

School Certification

A process completed by a school’s financial aid office that verifies a student’s enrollment status and loan details to ensure that the requested loan amount does not exceed the cost of attendance.

Self-Certification Form

A form developed by the US Department of Education to ensure an applicant borrows only what is needed to cover higher education expenses. An applicant must complete and return the form to their lender as part of the application process for private student loans.

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 Index (SAI)

Previously known as the Expected Family Contribution (EFC), SAI is a formula used to determine how much need-based financial aid a student is eligible for.

Student Aid Report (SAR)

An electronic or paper document that provides basic information about a student’s eligibility for federal student aid and summarizes their answers to the questions on the FAFSA (Free Application for Federal Student Aid). Beginning with the 2024–25 academic year, the SAR was replaced by the FAFSA Submission Summary.

Subsidized Loan

A federal student loan available to undergraduate students based on financial need. The government pays the interest on subsidized loans while a borrower is enrolled in school at least half-time and during periods of deferment.

T

Title IV

A section of the Higher Education Act of 1965, as amended, that authorized federal loan, work-study, 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.

U

Undergraduate Student

A student who is enrolled at a school in a course of study at or below the bachelor’s level.

Unsubsidized Loan

A federal student loan available to both undergraduate and graduate students and is not based on financial need. 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.

USD IBOR Consumer Cash Fallback (previously LIBOR)

The interest rate banks charge each other for loans. The 3-Month USD IBOR Consumer Cash Fallback is used as an interest rate index.

V

Variable Interest Rate

An interest rate that may change periodically (e.g., quarterly or annually) through the life of the loan and is based on an index such as SOFR.

W

W9-S

An IRS form that a borrower provides to their college, university, or private student loan lender to certify that the loan proceeds are used solely to pay for qualified higher education expenses.

X

Y

Z