Glossary of Financial Aid Terms

• Accrued Interest: The interest that accumulates on the unpaid principal balance of a loan.
• Annual Percentage Rate (APR): The interest maintained on a loan for a one-year period.
• Capitalization: The unpaid accrued interest is added to the principal balance of a loan, which increases the total principal balance. Subsequent interest accrues on the new total principal balance, which includes any capitalized interest.
• Consolidation: The combining of several loans into one account so that the borrower pays only one monthly installment.
• Default: The failure of the borrower (or endorser, if any) to make payments when due or to meet other terms of the Promissory Note. By law, default occurs at day 180 of delinquency for Federal Stafford, PLUS, SLS, and Consolidation loans.
• Deferment: A period of time during repayment in which the borrower, upon meeting certain conditions, is not required to make loan payments of loan principal.
• Delinquency: A period that begins on the day after the due date of a payment when the borrower fails to make the equivalent of one full payment.
• Dependent Student: You are considered a dependent student if you meet all of the following criteria:
  • You are under age 24 by December 31 of the award year
  • You are not married
  • You are not an individual with legal dependents
  • You are not a veteran of the U.S. Armed Forces
  • You are not a graduate or professional student
  • You are not an orphan or ward of the court
  If you meet one or more of the criteria, you are considered an independent student.
• Disbursement: The transfer of loan proceeds by check or Electronic Funds Transfer (EFT) by a lender to a borrower, a school, or an escrow agent. For a Consolidation loan, disbursement is the transfer of borrower loan proceeds from the consolidating lender to the current holder of the loan being consolidated.
• Expected Family Contribution (EFC): The amount a student and the student's spouse or family are expected to pay toward the student's cost of attendance.
• FDSLP: Federal Direct Student Loan Program
• Financial Need: The student's cost of attendance less the Expected Family Contribution.
• FFELP: The Federal Family Education Loan Program. This program offers federal subsidized and unsubsidized Stafford, PLUS, SLS, and Consolidation loans. These loan programs are funded by lenders, guaranteed by guarantors and reinsured by the federal government.
• Forbearance: A period of time during which the borrower is permitted to temporarily cease making payments, or reduce the amount of the payments.
• Free Application for Federal Student Aid (FAFSA): The form a student must complete in order to apply for virtually all forms of financial assistance. Visit FAFSA on the Web.
• Grace Period: The period that begins the day after a Federal Stafford loan borrower ceases to be enrolled at least half time at an eligible school, ends the day before the repayment period begins, and during which payments of principal are not required.
• Grants: Financial aid that does not have to be repaid and is awarded to students based on financial need.
• Guarantor: The agency or institution that insures against loss to lenders in the event of default in the FFELP.
• Independent Student: You are considered an independent student if you meet one or more of the following criteria.
  • You are over age 24 by December 31 of the award year
  • You are married
  • You are an individual with legal dependents
  • You are a veteran of the U.S. Armed Forces
  • You are a graduate or professional student
  • You are an orphan or ward of the court
  If you do not meet any of these criteria, you are considered a dependent student.
• Interest: The charge made to a borrower for use of a lender's money.
• Lender: The bank, credit union, or savings and loan institution that lends the money through the student loan program to the student.
• PLUS Loans: Parental Loans for Undergraduate Students. A parent may borrow funds for a dependent student. The loan amount cannot exceed the difference between the student's educational costs and other financial aid.
• Promissory Note: A legally binding agreement the borrower signs to obtain a loan, in which the borrower promises to repay the loan, with interest, in periodic installments.
• Scholarships: These are awards that are not required to be repaid. They are given to students who demonstrate or show promise of high achievement in areas such as academics, athletics, music, art, or other disciplines.
• Servicer (or Third-Party Servicer): An entity that enters into a contract with a program participant to administer any aspect of its participation (i.e., collecting payments and determining payment schedules) in a TIV program.
• State Grant Program: State funding coordinated by a state agency that provides grants to state residents who show financial need and who meet the eligibility criteria and are pursuing postsecondary education.
• SAR: Student Aid Report. The student's financial need-analysis report that is generated by the Department of Education's central processing system. The SAR summarizes information the student (and parent, if needed) reported on the FAFSA. An electronic version sent to the school is called an ISIR (Institutional Student Information Record).
• Subsidized Loan: A loan eligible for interest paid by the federal government. The federal government pays interest that accrues on subsidized loans during the student's in-school, grace, authorized deferment, and (if applicable) post-deferment grace periods, if the loan meets certain eligibility requirements.
• Undergraduate: A student who has not yet received a bachelor's degree.
• Unsubsidized Loan: A non-need-based loan such as an unsubsidized Federal Stafford loan or PLUS loan. The borrower is responsible for paying the interest on an unsubsidized loan during in-school, grace, and deferment periods, in addition to the repayment periods.
• Work-study program: Program where students work on or off campus to help pay for school costs.