Financial Aid Glossary

Academic Year is the period of the year during which a college or university is in session. At least 30 weeks in length, generally it spans from August or September to May or June.

Award Letter is the notification sent by the school listing the types and amounts of financial aid awarded.

Accrual Date is the day on which interest begins to accumulate on the unpaid balance of a subsidized loan.

Accrued Interest is interest that accumulates on the unpaid balance on a loan.

Adjusted Available Income - As related to Federal Methodology, family earnings that remain after the deduction of allowances including taxes.

Amortization - Paying off a debt in partial payments rather than in one lump sum.Appeal is a request that one’s financial aid eligibility or status be reviewed or adjusted. Asset Protection Allowance- Some assets of parents may be left out of Federal Methodology calculations to determine their ability to finance their student’s education. This is to protect parents’ interests, and generally widens in scope as parents’ ages increase.

Award Year – The academic year during which financial aid will be disbursed.

Base Year – The previous year before financial aid disbursement that serves as the reference to determine federal financial aid eligibility.

Bursar’s Office is the office of a college or university that handles tuition and billing.

Campus-Based Aid is federal financial aid that is managed by the student’s college or university, such as Perkins Loans and Work-Study programs.

COA – Cost of attendance is the annual amount it will cost to attend a particular school. This includes tuition and fees, room and board, books and supplies, transportation costs and personal expenses.

Compounded Interest is interest that is paid on both the balance of the loan as well as on other interest. Most federal student loans utilize Simple Interest.

Consolidation Loan combines several loans into a single loan with an extended repayment term. This is an effective way of lowering your monthly payment.

Cosigner – One who signs a loan agreement in addition to the primary borrower, thus agreeing to be held responsible for the loan should the borrower fail to pay.

CSS Profile – The College Scholarship Service (CSS) Profile financial aid form is an application distributed by the College Board allowing college students to apply for financial aid. It is required by private colleges and universities for a more detailed picture of the finances of a student and family.

Custodial Parent – The parent with whom a child has resided for the past 12 months, if the parents are divorced or separated. College financial aid decisions are based on the finances of this parent.

Department of Education – Federal government agency that is responsible for federal financial aid programs including Pell Grants, Perkins Loans, Stafford Loans, parents’ PLUS loans, and the Work-Study program.

Default occurs when a borrower fails to repay a loan in accordance with the terms of the promissory note. Defaulted Loans can negatively affect a borrower’s credit rating.

Default Fee is a 1% fee charged to the borrower deducted from the principal loan amount to be put an insurance fund.

Deferment is a temporary period during which no student loan payment is due if requirements are met. Interest payments can be made or if postponed, the interest is capitalized and added to the principal.

Delinquency is a failure to make a scheduled loan payment. This may be reported to the national credit bureaus and will negatively affect your credit rating.

Dependent Student is a student who is being financially supported by his or her parents or does not meet any of the criteria set by the federal government to have independent student status.

Disclosure Notice - This statement is required by law and notifies the borrower of the amount of student loan being borrowed, anticipated disbursement date and fees deducted from the principal.

Due Diligence - In the event that a student loan borrower fails to make payments or otherwise live up to the conditions of the promissory note, the federal government instructs the lender or servicer to contact the borrower and encourage repayment or make arrangements.

Entitlement is a type of financial aid program that awards all applicants who meet the requirements, such as the Pell Grant.

Entrance Interview - Before the first loan disbursement can be put on the student’s account, the student is required to go through an entrance interview to acknowledge the debt he or she is about to incur.

Exit Interview - Before the student graduates or leaves school he or she is required to go through the exit interview in which information is given on repayment obligation.

EFC- Expected Family Contribution - This is the estimated amount the family is expected to contribute towards the student’s education based on the information submitted on the FAFSA. This figure includes the PC- parental contribution as well as the SC- student contribution from assets and earnings.

FAFSA – Free Application for Federal Student Aid - The form used to collect family income and asset information to determine the eligibility for financial aid. When the form is processed, the SAR is produced.

Federal Direct/ Stafford Loan is a low interest loan with a fixed interest rate. The student must fill out a Master Promissory Note (MPN). The loan can be subsidized or unsubsidized.
Subsidized is a loan in which the federal government pays the interest while the student is in school, during the grace period and during periods of  authorized deferment.
Unsubsidized is a loan in which the student is responsible for the interest and it accrues while in school, during the grace period and during periods of deferment and forbearance. It is not based on financial need.

Federal Methodology – The need analysis formula used to determine the Expected Family Contribution (EFC) which the college uses to allocate funds. This methodology takes family size, the number of family members in college, taxable and nontaxable income, and assets into account.

Federal Perkins Loan is a federally funded low- interest loan program administered by the school.

Federal Parent PLUS Loan – Parent Loan for Undergraduate Students enables parents with good credit histories to borrow money to pay for their child’s education expenses. Parents can borrow up to the cost of attendance less financial aid.

Federal Pell Grant is a grant that is given to undergraduate students with the highest need. It does not have to be repaid.

Federal PIN Number is the 4 digit number assigned to the individual by the Department of Education needed to apply for federal aid (FAFSA) and makes changes to your Student Aid Report (SAR). Both student and parent need their own PIN number.

Federal Work-Study – (FWS) is a type of federal financial aid in which undergraduate and graduate students receive compensation that is partially funded by the government in exchange for work.

Financial Aid Award Package is the total amount of financial aid the student receives including grants, scholarships, work study and loans.

Financial Need is the cost of attendance less the expected family contribution. It is the basis for most financial aid awards.

Forbearance is a period of time, granted at the lender’s discretion, during which no loan payments of principal are required. The borrower must prove that he or she is willing but unable to make payments.

Gift Aid is financial aid that does not require repayment or anything in return, such as scholarships and grants.

Grace Period is the period of time before principal repayment begins following graduation or leaving school.

Gross Income is the total earnings before taxes, allowances, or other expenses are deducted.

Half-time Student is a student must be enrolled at least half-time to qualify for a student loan or in school deferment.

Independent Student is a student who is at least 24 years old, is married, is a graduate or professional student, is a veteran, has a dependent, or is an orphan or ward of the court. He or she lists only his or her own finances (or together with a spouse) on the FAFSA.

Interest is a percentage of the loan amount that is charged periodically to the student until full payment is received.

Lender is the actual source providing the loan funds being borrowed. It could be a bank, financial institution, the federal government or the school.

Loan Forgiveness – The federal government may write off one’s student loan debt in certain cases, like in the event of military service, volunteer work, or if one practices medicine or teaches in specified communities.

Loan Servicer is contracted by the lender to manage the day-to-day bill collection and payment processing.

Merit-Based Aid is financial aid that is granted not according to one’s financial need, but because of some academic achievement or talent.

MPN- Master Promissory Note is a single promissory note with a multi-year feature. Only one note is required for multiple loans or years at the school. See Promissory Note.

National Student Loan Data System is a federal database of students’ federal loans, grants and other financial aid information. Borrowers may access the system to find information on their financial aid.

Need is the amount that results when the Expected Family Contribution is subtracted from the Cost of Attendance.

Needs Analysis is the process used to determine the student’s eligibility for financial aid.

Need-Based Aid is financial aid that is granted according to one’s financial need.

Net Income is the earnings that remain after all taxes and allowances have been deducted.

Overaward is when financial aid is greater than a student’s financial need. The overaward may not total more than $400 above the student’s financial need.

Principal is the amount of loan borrowed. The student must repay the total loan principal plus interest.

Private Loans are also known as Alternative Education Loans. Private loans help bridge the gap between the actual cost of your education and the amount the government allows you to borrow in its programs. Private loans are offered by private lenders and there are no federal forms to complete.

Promissory Note is a legally binding document that the borrower signs before he or she receives the loan. The note includes information about the terms and conditions of the loan.

Repayment Options for Federal Student Loans-
Standard Repayment Plan- This is the repayment plan offered by your lender. You make payments for up to ten years. Your monthly payments are higher than in other plans, but your total payments are lower because you pay less interest.

Extended Repayment is a federal student loan repayment schedule that allows the borrower up to 30 years to repay.

Graduated Repayment is a federal student loan repayment schedule by which payments start out small and gradually grow larger.

Income Contingent Repayment is a federal student loan repayment schedule in which payment amounts depend on the income of the borrower. The more income you make, the larger the monthly payments.

Repayment Schedule is a document provided by the lender that lists the amount owed, amount of monthly payments, the dates the payments are due and the length of prepayment for each of your federal loans.

Satisfactory Academic Progress- In order to continue to receive financial aid, a student must maintain an adequate academic standing consistent with the college or university’s rules.

Scholarship is a type of financial aid for undergraduate students that does not need to be repaid. They may be merit- or need-based, but most are geared toward students in certain areas of study, in certain extracurricular activities, from certain areas, or with certain interests.

SAR- Student Aid Report is what is produced when the information from the FAFSA is processed. The school uses the SAR to determine the student’s eligibility for financial aid.

Selective Service- Required registration for the draft that must be completed by males age 18 and over. In order to be eligible for federal financial aid, one must be registered with the Selective Service.

Self-Help Aid is financial aid that requires repayment or something in return, such as work-study or loans.

Simple Interest is interest is due on the unpaid balance of a loan, but not on any accrued interest. Most federal student loans utilize this type of interest.

Term is the length of time you have to repay your loan, usually up to 10 years for federal student loans.

Unmet Need is the cost of attendance minus the financial aid awarded.

Unsecured Loan is a loan that is not secured against private property. Student loans are unsecured.

Verification is the process used by schools to verify the information submitted on the FAFSA. Verification usually entails providing signed copies of tax returns and other income documentation.

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