Glossary

Accrue

The process whereby interest accumulates on your loan. When we speak of "interest accruing on your loan," we mean that the interest due on your loan is accumulating.

Aggregate Loan Limit

The maximum total outstanding loan debt you can have when you graduate.

Borrower

An individual who signed and agreed to the terms in the promissory note and is responsible for repaying a loan.

Capitalization

Adding unpaid interest to the loan amount borrowed. Capitalization increases the unpaid principal balance of your loan and interest is charged on the increased principal amount. This occurs at the end of a deferment, forbearance or grace period on unsubsidized loans, and at the end of a forbearance period on a subsidized loan and increases the total amount you will repay over the life of your loan. To save money, pay interest before it's capitalized.

Consolidation

The process of combining one or more eligible federal educational loans into a single new loan. The Direct Loan Program offers a Direct Consolidation Loan for those borrowers who are interested in consolidating their eligible educational loans.

Co-signer

A person, other than the borrower, who signs the promissory note as a back up for repayment on the loan. A co-signer is pursued for collection on the loan if the borrower fails to fulfill his repayment obligations.

Cost of Attendance (COA)

The total amount it will cost you to go to school—usually expressed as a yearly figure. It's determined using rules established by law. The COA includes tuition and fees; on-campus room and board (or a housing and food allowance for off-campus students); and allowances for books, supplies, transportation, loan fees, and, if applicable, dependent care. It also includes miscellaneous and personal expenses, including an allowance for the rental or purchase of a personal computer. Costs related to a disability are also covered. The COA includes reasonable costs for eligible study-abroad programs as well. For students attending less than half-time, the COA includes tuition and fees and an allowance for books, supplies, transportation and dependent care expenses; and can also include room and board for up to three semesters, or the equivalent, at the institution. But no more than two of those semesters, or the equivalent, may be consecutive. Talk to the financial aid administrator at the school you're planning to attend if you have any unusual expenses that might affect your cost of attendance.

Credit (financial)

A summary of a person's financial strength, including his or her history of paying bills and ability to repay future loans. Students are often turned down for private loans because they have not established a credit history and have no income with which to repay debts. People who pay their bills after the due date, have defaulted on debts, or declared bankruptcy are usually judged to have poor credit. Several private companies gather consumers' financial information to create reports used by businesses and lenders to determine how much to lend and how much interest to charge each consumer. Federal law requires credit rating agencies to provide consumers with one free report on their credit each year.

Credit Bureau

Organization that tracks and reports the manner in which borrowers repay their loans (not only student loans).

Default

Failure to repay a loan according to the terms of the promissory note. There can be serious legal consequences for student-loan defaulters.

Deferment

A postponement of payment on a loan that is allowed under certain conditions and during which interest does not accrue for subsidized loans.

Delinquent

Delinquency status indicates that borrowers' accounts have become past due on payment. This occurs when borrowers' loan payments are not received by the due dates. Accounts remain delinquent until borrowers bring their accounts current with payments, deferments, or forbearances. If borrowers' accounts have become delinquent and the borrowers are unable to make payments, deferments or forbearances should be considered.

Dependent Student

A student who does not meet any of the criteria for an independent student. An independent student is at least 24 years old, married, a graduate or professional student, a veteran, a member of the armed forces, an orphan, a ward of the court, or someone with legal dependents other than a spouse. Please see the fact sheet "Am I Dependent or Independent?" at www.studentaid.ed.gov/pubs for more detailed information.

Direct Consolidation Loans

A federal program that allows you to combine one or more federal student loans into one new Direct Consolidation Loan. Only one monthly payment is made to the U.S. Department of Education. In certain circumstances, students who have loans under the Federal Family Education Loan Program (FFEL) may consolidate them into Direct Loans.

Direct PLUS Loans

Direct PLUS Loans are unsubsidized loans available to parents of dependent students, and to students enrolled in graduate or professional programs. These loans are available regardless of financial need and the amount of eligibility depends on the total cost of education.

Direct Subsidized Loan

Also referred to as Federal Direct Stafford Loan. A loan from the U.S. Department of Education made on the basis of the student's financial need and other specific eligibility requirements. The federal government does not charge interest on these loans while borrowers are enrolled at least half-time, during a six-month grace period, or during authorized periods of deferment.

Direct Unsubsidized Loan

Also referred to as Federal Direct Unsubsidized Stafford Loan. A federally financed student loan made to students meeting specific eligibility requirements. Interest is charged throughout the life of the loan. The borrower may choose to pay the interest charged on the loan or allow the interest to be capitalized (added to the loan principal) when the loan enters repayment.

Disbursement

Payment of loan proceeds by the lender. During consolidation, this term refers to sending payoffs to the loan holders of the underlying loans being consolidated.

Discharge (Cancellation)

The release of borrowers from their obligations to repay all or part of their Direct Loans. Direct Loans are discharged if a borrower dies, becomes totally and permanently disabled, was a victim of identity theft, or did not receive a refund owed to them. Borrowers might also be eligible for a discharge if they are unable to complete their program of study because the school closed while they were still attending or the school falsely certified the borrower's eligibility to receive a loan. In certain cases, a borrower's loan may be discharged in bankruptcy.

Borrowers can have their federal student loans discharged (i.e., forgiven, canceled, or repaid) if the student dies or becomes permanently disabled, or if they work in one of many in-demand fields such as teaching or healthcare.

Discounts—Electronic Debit Account (EDA)

If you repay your loans through the EDA repayment option, you could receive a quarter point (.25 percent) discount on your interest while in repayment.

Due Date (Payment Due Date)

The date during the month when payment of your current due amount must be received. If you have any past due amounts or fees or outstanding charges, these are due immediately.

Monthly payments must be received by the payment due date. Therefore, if you do not have your payments debited electronically from a bank account, you may want to mail your payments well in advance to ensure they arrive and are applied to your account(s) by the due date.

Electronic Debiting

Electronic Debiting is a service that allows your bank to automatically deduct your monthly Direct Loan payments from your checking or savings account. Your payment will be forwarded to the Direct Loan Servicing Center for processing. Payments may be deducted only from the borrower's bank account.

Entrance Counseling

Entrance counseling is an information session which takes place before the loan is disbursed and is required for first-time borrowers. The session explains your responsibilities and rights as a student borrower.

Exit Counseling

You will receive a notice about exit counseling when you graduate or attend school less than half-time. At this session, you'll be given information on your loans and when repayment begins.

Expected Family Contribution (EFC)

Your EFC is the number that's used to determine your eligibility for federal student financial aid. This number results from the financial information you provided in your Free Application for Federal Student Aid (FAFSA) application. Your EFC is reported to you on your Student Aid Report or SAR.

FAFSA4caster

An online tool designed to help students and families financially plan for college, you can get an early estimate of your federal student aid eligibility by using FAFSA4caster.

Federal Family Education Loan Program (FFEL Program)

A federal program that provides loans to eligible student and parent borrowers. The program consists of Federal Subsidized and Unsubsidized Stafford Loans, Federal PLUS Loans, and Federal Subsidized and Unsubsidized Consolidation Loans. Funds are provided by private lenders such as banks, credit unions, and other private financial institutions. The loans are backed by the federal government.

Forbearance

A period during which your monthly loan payments are temporarily suspended or reduced. You may qualify for a forbearance if you are willing but unable to make loan payments due to certain types of financial hardships.

A complete list of Direct Loan forbearances and their eligibility criteria can be seen at www.dlservicer.ed.gov.

Forgiveness (loans):

Free Application for Federal Student Aid (FAFSA)

The FAFSA or FAFSA on the Web, the online version, is the FREE application used to apply for federal student aid.

Grace Period

After borrowers graduate, leave school, or drop below half-time enrollment, loans that were made for that period of study have several months before payments are due. This period is called the "grace period."

Grace periods extend from 6 to 12 months after borrowers leave school:

• Most FFEL and Direct Loans have six-month grace periods.



• Perkins Loans have grace periods of either six or nine months, depending on when the loan was first disbursed.



• Some health professions (loans administered by the U.S. Department of Health and Human Services that are included in consolidation loans by the U.S. Department of Education) have grace periods of 9–12 months.

During the grace period, no interest accrues on subsidized loans. Interest accrues on unsubsidized loans during grace periods, and this interest is capitalized when borrowers' loans enter repayment.

Borrowers' repayment periods begin the day after their loans' grace periods end. First payments will be due within 60 days after the repayment periods begin.

Each loan has only one grace period. If borrowers return to school after the grace periods has expired, the borrowers' loans qualify for deferment while borrowers are enrolled but return to repayment after borrowers leave school. There is no additional grace period.

Guaranty Agency

The guaranty agency is an organization that administers the FFEL Program in your state. This agency is an excellent source of information on FFEL Loans. For the name, address and telephone number of the agency serving your state, you can contact the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243).

Half-time

At schools measuring progress in credit hours and semesters, trimesters, or quarters, "half-time" is at least six semester hours or quarter hours per term for an undergraduate program. At schools measuring progress by credit hours but not using semesters, trimesters or quarters, "half-time" is at least 12 semester hours or 18 quarter hours per year. At schools measuring progress by clock hours, "half-time" is at least 12 hours per week. Note that schools may choose to set higher minimums than these. You must be attending school at least half-time to be eligible for a Stafford Loan. Half-time enrollment is not a requirement to receive aid from the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant, Federal Work-Study and Federal Perkins Loan programs.

Independent Student

An independent student is at least 24 years old, married, a graduate or professional student, a veteran, a member of the armed forces, an orphan, a ward of the court, or someone with legal dependents other than a spouse. Please see the fact sheet "Am I Dependent or Independent?" at www.studentaid.ed.gov/pubs for more detailed information.

Interest

A loan expense charged by the lender and paid by the borrower for the use of borrowed money. The expense is calculated as a percentage of the unpaid principal amount (loan amount), which includes the original amount borrowed and any capitalized interest. Accrued interest is interest that accumulates on the unpaid principal balance of the loan.

Interest Paid

Interest is calculated and accumulates daily based on an interest rate charged on your loans. The Interest Paid amount is the total amount of interest you would be expected to pay for a particular loan(s).

Interest Rate

The current rate at which interest is calculated on your loan(s).

Lender

The organization that made the loan initially; the lender could be the borrower's school (for Federal Perkins Loans); a bank, credit union, or other lending institution (for FFELs); or the U.S. Department of Education (for Direct Loans).

Loan

Money borrowed from a lending institution or the U.S. Department of Education that must be repaid.

Loan Fee

A fee payable by the borrower that is deducted proportionately from each loan disbursement.

Loan Holder

An entity that holds a loan promissory note and has the right to collect from the borrower. Many banks sell loans, so the initial lender and the current holder could be different.

Loan Principal

The total sum of money borrowed. Loan principal includes the original amount borrowed plus any interest that has been capitalized.

Loan Servicer

An organization that administers and collects education loans payments on behalf of the lender.

Loan Type

The kind of Federal Loan program name by which you obtained your student loans. For example your loan type will say "Stafford Subsidized" if your loan was a Subsidized loan obtained through the FFEL or Direct Loan Programs (Stafford Loans).

NSLDS

The National Student Loan Data System (NSLDS) is a centralized database that stores information on all Department loans and grants. NSLDS also contains borrowers' school enrollment information. Borrowers can access this information online using their Department of Education PIN. Web site: www.nslds.ed.gov.

Parent Borrower

Parents that have at least one PLUS Loan to finance their dependent child's education.

Past Due

The amount that you were scheduled to pay in previous month(s) but did not. The past due amount is also called the delinquent amount. Your account is considered "delinquent" if you have missed any monthly payments. Past Due amounts are due immediately.

Payment Due Date

The date during the month when payment of your current due amount must be received. If you have any past due amounts or fees and charges outstanding, these are due immediately. Monthly payments must be received by the payment due date. Therefore, if you do not have your payments debited electronically from a bank account, you may want to mail your payments well in advance to ensure they arrive and are applied to your account(s) by the due date.

Perkins Loans

Formerly known as National Defense Student Loan, National Direct Student Loan. Federal Perkins Loans are low-interest (5 percent) loans for both undergraduate and graduate students with exceptional financial need. Your school is your lender. The loans are made with government funds with a share contributed by the school. You must repay these loans to your school.

PIN (Federal Student Aid PIN)

Your PIN serves as your identifier to allow access to personal information in various U.S. Department of Education systems.

Your PIN also acts as your digital signature with some online forms. Use your PIN to electronically sign your online Consolidation Loan application and Promissory Note and deferment, or forbearance forms.

If you do not already have a PIN, you can request one online at www.pin.ed.gov. The PIN you will receive will be your universal U.S. Department of Education PIN.

Preferred Lender List

A list of lenders that a college suggests its students consider when taking out federally guaranteed student loans. Students who receive a "preferred lender" list from a school should remember that those lists are not legally binding. Borrowers can choose from any federally approved lender and may often find a better deal outside of the list.

Prepayment

A prepayment is an amount in excess of the amount due on a loan. If borrowers have more than one federal student loan, they must specify which loan they are prepaying. Like all other federal student loan payments, a prepayment will first be applied to any outstanding fees and charges, next to outstanding interest, and then to the principal balance of the loan(s). There is never a penalty for prepaying principal or interest on federal student loans.

Promissory Note

A promissory note is a binding legal document you sign when you get a student loan. It contains the loan terms and conditions under which you're borrowing and the terms under which you agree to pay back the loan. It will include deferment and cancellation provisions available to the borrower. It's very important to read and save this document because you'll need to refer to it later when you begin repaying your loan or at other times when you need information about provisions of the loan, such as deferments or forbearances.

Rebate

The amount of the up-front interest rebate given to borrowers. You usually must make all of your first 12 required monthly payments on time or the rebate amount will be added back to the principal balance of your loans. Check with your lender.

Refund

The total amount of funds returned to the loan program as unused for the student's education expenses.

Rehabilitation

The process of bringing a loan out of default and removing the default notation on a borrower's credit report. To rehabilitate a Direct or a FFEL Loan, you must make at least 9 full payments of an agreed amount within 20 days of their monthly due dates over a 10 month period to the U.S. Department of Education. To rehabilitate a Perkins Loan, you must make 12, on-time, monthly payments of an agreed amount to the Department. Rehabilitation terms and conditions vary for other loan types and can be obtained directly from loan holders.

Repayment Incentive

A benefit that the U.S. Department of Education offers borrowers to encourage them to repay their loans on time. Under a repayment incentive program, the interest rate charged on borrowers' loans might be reduced. Some repayment incentive programs require borrowers to make a certain number of payments on time to keep the benefits of the repayment incentive.

Repayment Plan

Changing repayment plans is a good way to manage your loan debt when your financial circumstances change. For example, you can usually lower your monthly payment by changing to another repayment plan with a longer term to repay the loan. There are no penalties for changing repayment plans.

Repayment Schedule

A statement provided by the loan servicer to the borrower that lists the amount borrowed, the amount of monthly payments, and the date payments are due.

Repayment Term

The number of months it will take to repay your federal student loans under a specific repayment plan.

Secondary Market

An organization that purchases student loans from originating lenders so these lenders can make additional student loans. If an organization buys the loans, that organization becomes the "loan holder." Only loans under the FFEL program are sold in the secondary market.

Servicer

An entity designated to track and collect a loan on behalf of a loan holder.

Simple Daily Interest

The method used to calculate interest on your student loans. To learn more about how interest is calculated see How is interest calculated?

Status

The present state of your Subsidized, Unsubsidized, PLUS, or Consolidation loan(s). An account will be either:

Student Aid Report (SAR)

After you apply for federal student financial aid, you'll get your FAFSA results in an e-mail report within a few days after your FAFSA has been processed or by mail in a few weeks. This report is called a Student Aid Report or SAR. Your SAR details all the information you provided on your FAFSA. If there are no corrections or additional information you must provide, the SAR will contain your EFC, which is the number that's used to determine your eligibility for federal student aid. Whether you applied online or by paper, we will automatically send your data electronically to the schools you listed on your FAFSA.

Subsidized Loan

A loan for which a borrower is not responsible for the interest while in an in-school, grace, or deferment status.

Total Amount Repaid

The total amount you would be expected to pay over the life of the loan, including principal and interest.

Total Due

Total Due = Current Due amount + Past Due amount + Late Charges and Fees

Unsubsidized Loan

A loan for which the borrower is fully responsible for paying the interest regardless of the loan status. Interest on unsubsidized loans accrues from the date of disbursement and continues throughout the life of the loan.

Variable Interest

The rate of interest charged on a loan that changes annually and fluctuates with a stated index.

William D. Ford Federal Direct Loan Program (Direct Loan Program)

The federal program that provides loans to eligible student and parent borrowers. The loan programs include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans. Funds are provided directly by the federal government to eligible borrowers through participating schools.