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A
Accrued Interest:
The amount of interest, calculated daily, that has accumulated on the unpaid amount of your loan.
Adjusted Gross Income:
Taxable income from all sources. (See your Federal Income Tax Form)
Amortization:
The reduction of loan balance by your monthly payments.
Assets:
Items of financial worth which may include your home, business, savings and checking accounts, stock, bonds, real estate, trust funds, etc.
Award Letter:
This official document issued by a college’s Financial Aid Office lists all of the financial assistance offered to a student.
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C
Capitalization:
A process of adding unpaid interest to the principal balance of your loan. This will increase the balance due and may increase monthly payments.
Cost of Attendance (COA) Also known as Budget:
The total amount a student must pay to attend school for one academic year, including tuition, room and board, books, supplies, transportation, and personal expenses. A college’s Financial Aid Office determines this figure.
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D
Default:
Failure to pay your loan according to the terms disclosed on your promissory note. You are in default on a Federal Family Educational Loan Program (FFEL) if your payments are more than 270 days past due or if you fail to comply with other terms of the loan.
Deferment: A period of time during repayment in which the borrower, after meeting certain criteria, is not required to make their regular monthly payments. Note: interest payments may or may not be postponed depending on the type of loan.
Volunteer ACTION Program Deferment: A deferment for borrowers serving as full-time volunteers in a program authorized under the Domestic Volunteer Act of 1973. the borrower must have volunteered for at least one year.
Delinquent:
If a payment is not received by the due date, it is considered delinquent. Delinquencies greater than 30 days are generally reported to national credit bureaus.
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E
EFT (Electronic Funds Transfer):
The process whereby your bank sends the loan proceeds electronically to your school if the school participates in this program.
Exit Interview:
An in-person or online counseling session with the school's Financial Aid Office before graduation or withdrawal to review the terms and obligations of your student loan.
Expected Family Contribution (EFC):
The amount a family is expected to pay toward college costs. This amount is determined via the FAFSA process by a need analysis formula established by the federal government and can be found on your Student Aid Report (SAR).
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F
FAFSA:
The Free Application for Federal Student Aid (FAFSA) is a standard federal form used to determine your eligibility for most types of financial aid including Federal Government backed loans. The FAFSA is typically completed early in the year and it requires income, asset, and tax information from the students and/or parents.
Financial Aid Package:
The total amount of monetary assistance available to the student including all grants, scholarships, work-study and loans available from school, state and federal programs, as listed in a college’s financial aid award letter.
Financial Need (or Aid Eligibility):
The difference between the total cost of attendance and the Expected Family Contribution.
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G
Grace Period:
An amount of time allowed before principal repayment of a loan must begin after a student graduates, leaves school or drops below half-time status. No payments on your student loans are required during this time. Details of your grace period are specified in your promissory note and are not available for all loans.
Grants:
A form of financial aid, similar to Scholarships, that do not have to be repaid.
Gross Income:
Your income before taxes and deductions.
Guarantee/Insurance Fee:
A sum charged by the guaranty agency to insure a loan. The guarantee fee (sometimes called an insurance fee) is deducted from the principal amount of your loan and paid by your lender to the guaranty agency.
Guaranty Agency:
A state or non-profit organization, which has an agreement with the Secretary of Education under the Higher Education Act to insure student loans made by lenders.
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I
Interest:
The fee charged to borrow money, usually a percent of the outstanding amount, which accrues and is paid over the life of a loan.
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L
Loan:
A sum of money borrowed (principal) usually for a specific reason (e.g., to obtain an education, buy a car, etc.). The entity lending the money (e.g. a bank) usually charges interest for use of the money. The amount of money borrowed is typically repaid with interest over a period of time.
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M
Master Promissory Note (MPN):
Master Promissory Note refers to the revised promissory note which the Department of Education has authorized to be used with Stafford loans beginning 7/1/1999. It allows lenders to use a single MPN instead of requiring borrowers to sign a new promissory note for additional advances.
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O
Origination Fee:
A sum charged by the Federal Government on FFEL loans to offset the cost of processing the loan. The amount of the fee is deducted from the dollar amount of your loan by the lender and paid to the U.S. Department of Education.
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P
Payoff Balance:
This is the total amount you would owe if you were to pay off your entire loan. It includes the outstanding principal plus any unpaid accrued interest.
Pell Grants:
One of the largest sources of grants, Pell Grants are distributed by the Federal Government and are designed to help students with financial need pay for college.
Perkins Loans:
A campus-based, low interest loan for graduate and undergraduate students. The college acts as the lender using a limited pool of funds provided by the federal government. These loans are awarded based on exceptional financial need.
PLUS (Parent Loans for Undergraduate Students):
These are loans under the FFEL program for parents of dependent undergraduate students. They require a credit check. The interest rate is low and repayment begins 60 days after disbursement.
Principal:
The dollar amount of the loan that must be repaid upon maturity, and upon which interest will be charged.
Promissory Note:
The binding document a borrower signs to obtain a loan. The note includes all the terms and conditions of the loan and the borrower’s promise to repay the loan with interest.
Repayment Period:
This is the amount of time during which you repay the money borrowed plus interest.
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S
Scholarships:
Scholarships, like grants, are a form of financial aid that do not have to be repaid. These are available from many sources including community groups, schools and private corporations. Scholarships can be awarded based on a variety of criteria including scholastic achievement, hobbies and college majors.
Stafford Loan:
Loans under the FFEL program awarded on the basis of financial need. They may be subsidized or unsubsidized. These loans can be made from a bank, credit union or other eligible lender or obtained directly from the government under the Federal Direct Lending Program.
Student Aid Report (SAR):
A report sent to a student by the government 4 – 6 weeks after submitting a FAFSA. The report informs the student of the Expected Family Contribution (EFC) and the financial aid for which the student is eligible. College financial aid offices use the report information to build a financial aid package for a student.
Subsidized Loan:
A loan on which the government pays the interest for a student while enrolled in school at least half-time and during periods.
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U
Unsubsidized Loan:
A loan on which the borrower is always responsible for paying the interest while in-school and during deferment, forbearance and grace periods. (i.e. Unsubsidized Federal Stafford Loan or Federal PLUS Loan).
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V
Variable Interest:
Interest rates that change periodically (e.g. quarterly, annually etc.). The interest rates for Federal Stafford and PLUS Loans are set by the government each year and change annually on the first of July.
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© 2009 California State Polytechnic University, Pomona