Glossary of Terms
Accrue: To increase. Loan interest accumulates on the unpaid principal balance of a loan according to the current interest rate and the amount you owe.
Adjusted Gross Income (AGI): All taxable income minus IRS allowable adjustments to income.
Adverse Credit History: A less-than favorable history of payments by a loan applicant.
Aid Package: The total financial aid awarded to a student by the financial aid office of a college or university. This can be a combination of scholarships, grants, loans, and work-study.
Annual Percentage Rate (APR): The total cost of a loan including all fees and interest.
Bankruptcy: A legal declaration that a person is insolvent (unable to pay his or her bills as they fall due).
Capitalized Interest: Unpaid interest that is added to the unpaid principal balance on a loan.
Collateral: Personal property that you pledge as security for a loan made to you. This property may become the property of the lender if you fail to repay the loan.
Collection: The activities and/or actions by lenders, guarantors, services, and collection agencies to obtain payment to an unpaid loan principal and interest form a borrower defaults on the loan.
Collection Charges: Costs incurred by the lender or its agents in collecting overdue payments. Among these charges may be attorney’s fees, court costs, and telegram fees.
Combined Billing: A single bill sent to the borrower by a lender or servicer that covers all of the loans serviced by that lender/servicer. With combined billing, the borrower only needs to make one payment each month for all of the loans. The original terms of the loans are not affected.
Consolidation: The act of refinancing multiple federal education loans into one new consolidation loan with a new repayment term, monthly payment amount, and interest rate.
Cosigner: A person who signs the promissory note in addition to the borrower and is responsible for obligation if the borrower does not pay.
Cost of Attendance: The total cost of attending a college for an academic year. Budgets generally include tuition, fees, room, board, books, supplies, travel and personal expenses. Each college or university develops its own student budget.
Credit Bureau: An agency that gathers and stores credit information on individuals and has your financial history on file. This can include information on your loans, credit cards, place of employment, and student loan repayment history. This information is available to potential employers and creditors in the future.
Credit-ready Borrower: A borrower who either has no credit history at all or has a credit history with one of the following: excessive number of delinquencies on consumer loans or revolving charge accounts; prior education loan default; or derogatory credit items such as charge-offs, foreclosures, open judgments, or bankruptcy.
Credit Report: A report that contains details about individual borrowing habits. Lenders use credit reports to determine whether they should approve a loan and to set the terms (interest rate, fees, and length) of the loan.
Credit Scoring: A method, based on statistical analysis of applicant characteristics, through which lenders determine the applicant’s qualification for credit.
Creditor: One who has extended credit to a person and to whom a debt is owed.
Creditworthy Borrower: An individual with no negative credit history based on the criteria established by the lender and the US Department of Education.
Debt Management Counseling: Counseling provided to students about their debt and accumulated indebtedness.
Default: Failure to make several regular loan payments on time, or failure to meet the terms and conditions of the loan.
Deferment: An agreement between you and your lender for postponement of your loan payment.
Delinquency: Failure to make one or more loan payments on time.
Disclosure Statement: A document that provides you with information about the actual cost of your loan, including the interest rate, the origination, insurance , and other loan fees, and other types of finance charges.
Economic Hardship: A period during which the borrower is working full-time but is earning an amount that does not exceed the greater of the federal minimum wage or the poverty line for a family of two. It also exists if a borrower’s monthly payments on federal education loans are equal to or greater to 20% of the borrower’s total monthly gross income.
Estimated Financial Assistance (EFA): The college or university’s estimated of the amount of financial assistance that you may be awarded for a particular enrollment period. The EFA includes assistance from federal, state, and institutional sources; scholarships; financial need-based employment; or other sources.
Expected Family Contribution (EFC): The amount of money that your family is expected to be able to contribute to your education, as determined by a need analysis formula approved by congress and used by the U.S. Department of Education. The EFC includes the parent contribution and the student contribution.
FAFSA (Free Application for Federal Student Aid): The form that you must complete to apply for federal title IV financial assistance, including student loans.
Federal Methodology: The need analysis formula used to determine the expected family contribution.
Federal Work-Study Program: A program that provides undergraduate and graduate students with part-time employment during the school year. The federal government pays a portion of the student’s salary.
Fellowship: A form of aid given to graduate students to help support their education. Fellowships are a form of gift aid and don’t have to be repaid.
Financial Aid Package: The total amount of financial aid (federal and non federal) such as scholarships, grants, loans, and or work-study for which you are eligible.
Financial Need: The difference between the cost of attendance at a college or university for a year and the EFC.
Forbearance: A temporary delay of principal payments for a specific period of time.
Gift Aid: Financial aid, such as grants and scholarships, that does not need to be repaid.
Grace Period: The period of time between the date you leave school (or drop below half-time status) and the date you begin repayment.
Graduated Repayment: A repayment schedule in which the monthly payments start out smaller and become larger as the repayment period continues.
Graduate/Research Assistantship: A form of financial aid awarded to graduate students to help support their education.
Guarantee Fee: A fee up to 1% of the total loan amount charged by the guarantor. It ensures the lender against financial loss in case you go into default on your loan.
Half-time Student: A student who is enrolled in a college or university and is carrying an academic workload that amounts to at least one half the work load of a full time student, as determined by the school.
Holder: The lender, institution, or agency that holds legal title to (owns) a loan.
Income Sensitive Repayment: A repayment program in which the size of the monthly payments depends on the income earned by the borrower. As the borrower’s income increases, so do the payments.
In-school and Grace Interest Subsidy: Interest that the federal government pays on certain loans while borrowers are in school, during grace periods, and during authorized deferments.
Interest-only Payment: A payment that cover only accrued interest owned on a loan and more none of the principal balance.
Internship: A part-time job during the academic year or the summer months in which you receive supervised practical training in your field.
Lender: The financial institution that provides funds for the borrower.
LIBOR: The London Interbank Offered Rate, the most widely used benchmark or reference rate to short term interest rates.
Loan Forgiveness: Cancellation of all or part of an education loan by the federal government because the borrower meets certain criteria (for example, he or she is performing military or volunteer service).
Origination Fee: Money that is deducted from each loan disbursement and sent to the federal government to help pay the cost of subsidizing the loan.
Payoff Amount: The total loan amount required to pay off a specific loan.
Prime Rate: The interest rate charged by financial institutions to customers whose credit standing is high enough that there is little risk to the lender when it makes the loan.
Principal: The amount of loan money that you have borrowed or that you have not yet paid back.
Principal Balance: The outstanding amount of the loan on which the lender charges interest.
Private Loans: Education loan programs established by private lenders to supplement the student and parent education loan programs available from federal and state governments.
Promissory Note: The legal document that you sign before the lender disburses loan funds.
Reference: An individual to whom inquires may be made regarding another person's character, ability, or whereabouts.
Repayment Period: The term of the loan in which you are required to make payments on an education loan.
Repayment Schedule: A document you will receive soon after you leave school that lists your monthly payment, the interest rate, the total amount owed, the dates that payments are due, and the term of the loan.
Satisfactory Academic Progress: A requirement for eligibility for federal student aid. Satisfactory progress standards are established by each school.
Secondary Market: Institutions that buy student loans from banks, savings and loan associations, or credit unions, thereby providing lenders with capital to fund new loans.
Servicer: The company that handles address updates, refunds, deferments, forbearances, and loan payments on behalf of the lender.
Standard Repayment Schedule: A repayment schedule under which the borrower pays the same amount each month throughout the entire repayment period, or pays an amount that is adjusted to reflect annual changes in the loan's variable interest rate.
Student Aid Report (SAR): A document sent by the federal processor to students after the FAFSA is submitted.
Student Contribution: The amount of money the federal government expects the student to to his or her education.
Subsidized Loan: A loan eligible for interest benefits paid by the federal government.
T-Bill (Treasury Bill): The basis for interest rates for many federal and private (alternative) student loans.
Teaching Assistantship: A form of financial aid awarded to graduate students to help support their education.