Glossary

The following list is only partial; other financial aid terms can be found at www.finaid.org/questions/glossary.phtml.

Free Application for Federal Student Aid (FAFSA)
Form used to apply for Pell Grants and all other need-based aid. As the name suggests, no fee is charged to file a FAFSA.

Dependency Status
Determines to what degree a student has access to parent financial resources.

Student Aid Report (SAR)
Report that summarizes the information included in the FAFSA and must be provided to your school's FAO. The SAR will also indicate the amount of Pell Grant eligibility, if any, and the Expected Family Contribution (EFC). If you provide an email address on your FAFSA, you should receive an electronic Student Aid Report within a week. If you don't provide an email address, you will receive a paper SAR within 3 weeks. Review your SAR and correct any errors by going to www.FASFA.ed.gov. Keep a copy of the SAR in your records. You can request a duplicate by going to the FAFSA website above or by calling 1-800-433-3243.

Cost of Attendance (COA)
(Also known as the cost of education or "budget") The total amount it should cost the student to go to school, including tuition and fees, room and board, allowances for books and supplies, transportation, and personal and incidental expenses. Loan fees, if applicable, may also be included in the COA. Child care and expenses for disabilities may also be included at the discretion of the financial aid administrator. Schools establish different standard budget amounts for students living on-campus and off-campus, married and unmarried students and in-state and out-of-state students.

Expected Family Contribution (EFC)
The amount of money that the family is expected to be able to contribute to the student's education, as determined by the Federal Methodology need analysis formula approved by Congress. The EFC includes the parent contribution and the student contribution, and depends on the student's dependency status, family size, number of family members in school, taxable and nontaxable income and assets. The difference between the COA and the EFC is the student's financial need, and is used in determining the student's eligibility for need-based financial aid. If you have unusual financial circumstances (such as high medical expenses, loss of employment or death of a parent) that may affect your ability to pay for your education, tell your financial aid administrator (FAA). He or she can adjust the COA or EFC to compensate. See Professional Judgement.

Need
The difference between the COA and the EFC is the student's financial need - the gap between the cost of attending the school and the student's resources. The financial aid package is based on the amount of financial need. The process of determining a student's need is known as need analysis.

Enrollment Status
An indication of whether you are a full-time or part-time student. Generally you must be enrolled at least half-time (and in some cases full-time) to qualify for financial aid.

Financial Aid
Money provided to the student and the family to help them pay for the student's education. Major forms of financial aid include gift aid (grants and scholarships) and self-help aid (loans and work).

Gift Aid
Financial aid, such as grants and scholarships, which does not need to be repaid.

Loan
A type of financial aid which must be repaid, with interest. The federal student loan programs (FFELP and FDSLP) are a good method of financing the costs of your college education. These loans are better than most consumer loans because they have lower interest rates and do not require a credit check or collateral. The Stafford Loans and Perkins Loans also provide a variety of deferment options and extended repayment terms.

Federal Work-Study (FWS)
Program providing undergraduate and graduate students with part-time employment during the school year. The federal government pays a portion of the student's salary, making it cheaper for departments and businesses to hire the student. For this reason, work-study students often find it easier to get a part-time job. Eligibility for FWS is based on need. Money earned from a FWS job is not counted as income for the subsequent year's need analysis process.

Financial Aid Package
The complete collection of grants, scholarships, loans and work-study employment from all sources (federal, state, institutional and private) offered to a student to enable them to attend the college or university. Note that unsubsidized Stafford loans and PLUS loans are not considered part of the financial aid package, since these financing options are available to the family to help them meet the EFC.

Loan Terms

Accrued Interest - Interest which accrues on the loan and is payable by the borrower or, in the case of subsidized Federal Stafford Loans, by the federal government during in-school, grace and deferment periods.

Amortization - The reduction and retirement of a debt through periodic payments of interest and principal.

Annual Percentage Rate (APR) - A percentage calculation that reflects the total cost (interest plus fees) on an annual basis.

Cancellation - The obligation to repay the principal and interest may be cancelled upon the fulfillment of specific requirements by the borrower.

Capitalization of fees and Interest - Fees and accrued interest on a loan are added to the principal balance. Both then accrue interest as part of the principal balance.

Compounded Interest - The frequency with which interest and fees are computed and added to the principal balance. If the promissory note indicates that interest will be compounded, the lender will, at stated intervals, capitalize the accrued interest.

Default - The failure of a borrower either to make installment payments when due, or to comply with other terms of the promissory note. See A Student Loan Borrower's Guide to Defaulted Student Loans for more information.

Deferment - A period during which the repayment of the principal amount of the the loan is suspended as a result of the borrower meeting one of the requirements established by law and/or contained in the promissory note. During this period, the borrower may or may not have to pay interest on the loan.

Deferred Interest - Interest on which payments are delayed for the borrower and paid at a later date. Such deferred (accrued) interest may be capitalized.

Delinquent borrower - A borrower who has failed to make one or more installment payments by the due dates.

Disclosure Statement - A statement of the actual loan costs, including the interest rate and any additional fees, which is presented to the borrower at the time the loan is made. A Repayment Disclosure Statement is a statement of repayment terms of the loan which is required to be sent to the borrower prior to the due date of the first payment on the loan.

Entrance Counseling - A loan repayment and debt management counseling session required by federal regulations, that is arranged and conducted by a school's financial aid administrator for students who are receiving their first federally guaranteed student loan. This session must be conducted before the student can receive the proceeds of the first disbursement of their loan.

Exit Counseling - A loan repayment and debt management counseling session required by federal regulations, that is arranged and conducted by a school's financial aid administrator for students who have received federally guaranteed loans while attending school. This counseling session must be completed before the student graduates or leaves school, whenever possible.

Federal Consolidation Loan - A program offered by eligible lenders which allows the following federal loans to be combined into a single new loan: Federal Perkins Loans, National Direct/Defense Student Loans (NDSL), Federal Stafford Loans (both subsidized and unsubsidized),Federal Supplemental Loans for Students (SLS), Federal PLUS Loans, Auxiliary Loans to Assist Students (ALAS), Health Professionals Student Loans (HPSL), and Federally Insured Student Loans(FISL).

Forbearance - At a lender's option, an agreement to accept a temporary cessation of loan payments, an extension of time for making payments, or smaller payments than were previously scheduled. Forbearance may be given for circumstances that are not covered by deferment that adversely affect the borrower's ability to meet loan payment obligations.

Garnishment of Wages - The deduction of a portion of a borrower's paycheck, with or without the borrower's consent. A lender or the government may take this action to force repayment of a loan that is in default.

Graduated Repayment - Loan repayment that is lower at the beginning of repayment and gradually increases during the repayment period. It is not based on income.

Guarantors - A state agency or private, non-profit institution or organization that administers student loan programs. Guarantors insure lenders against losses due to a borrower's default, death, disability, or bankruptcy.

Guarantee Fee/Insurance Premium - A percentage of principal charged to the borrower by the guarantor.

Holder - The owner of the loan.

Income Sensitive Repayment - Loan repayment that is based on the borrower's income. Payments increase as income rises. The Iowa Student Loan website has an example.

Lender - The bank, savings and loan, credit union, or other approved entity from which the borrower obtains a student loan.

Loan Period - The academic year or portion thereof for which the applicant is enrolled and is seeking one or more loans.

Origination Fee - A processing fee, calculated on the principal amount borrowed, that is charged to the student by the lender. The fee is normally deducted from the amount of the loan proceeds.

Principal and Interest - Principal refers to the amount borrowed plus any capitalized fees and interest. Interest refers to the amount charged for the use of the money over time, and is usually stated as an annual percentage of the principal amount.

Promissory Note - A legal document signed by the borrower when obtaining a loan. It lists the conditions under which the loan is made and the terms under which the borrower agrees to pay back the loan.

Repayment Schedule - A plan which sets forth the principal and interest due in each installment, the number of payments required to pay the loan in full, the interest rate, and the due dates of the first and subsequent payments.

Secondary Market - A lender, agency, or institution that buys education loans from the originating lenders. Lenders sell education loans to secondary markets to replenish and generate capital for their continuing operations, including making additional loans.

Servicer - Many lenders and secondary markets hire companies that specialize in student loans to handle billing, collections, deferments,etc. Student loan accounts are often assigned to a servicer.

Terms - The specific conditions of a loan, including the requirements governing receipt and repayment of a loan. It is often used more specifically to refer to the charges for the loan, such as interest, fees, etc.

Variable Interest - Rate of interest that is tied to a certain index (depending on the loan) and changes periodically.