Glossary of Financial Aid

Accrued Interest - Addition of unpaid interest to the principal balance of the loan.

Award Letter - A letter from a school that states the type and amount of aid the school is willing to provide if an individual decides to attend the institution.

Co-Borrower/Co-signer- An individual who signs the promissory note in addition to the borrower and is equally responsible for the obligation of the loan.

Consolidation - Combining several loans into a single loan to reduce the monthly payment amount and/or increase the payment period.

Cost of Attendance (COA) - The total amount it will cost it will cost an individual to go to school, which is usually expressed as a yearly figure.

Credit History - Record of current and past credit transactions that potential lenders use to determine a borrower's ability to repay debt.

Default - A failure to meet the terms of a loan as stated in the promissory note. Typically, a borrower who fails to make several payments in a row is considered in default.

Deferment- An authorized period of time during which loan payments may be suspended. For some loans, the federal government pays the interest during a deferment. On others, the interest accrues and is capitalized; the borrower is responsible for repaying the principal and interest.

Delinquent- A failure to meet the terms of a loan as stated in the promissory note and/or to make timely payments on a loan. Delinquency may result in late fees and will have a negative impact on your credit score. Continued delinquency can impact on an individual's credit score.

Dependent Student - An undergraduate student whose parents provide more than half of his/her financial support. A dependent student is single, under 24 years of age, has no legal dependents, is not an orphan or ward of the court, nor a veteran of the U.S. Armed Forces.

​DIRECT LOANS - Loans, both subsidized (need-based) and unsubsidized (non-need based), that are guaranteed by the federal government and are available to students to fund education.​

EFC/Expected Family Contribution - Amount a family is expected to contribute to a student's education, based on family earnings, net assets, savings, size of family, and number of students in college.

Entrance/Exit Counseling - Students with federal education loans are required to receive counseling before they receive their first loan disbursement and before they graduate or withdraw (leave school). During this counseling, the borrower's rights and responsibilities and loan terms and conditions are reviewed with the student. This session may be conducted online, by video, in person with a financial aid counselor, or in a group meeting.

E-signature - Electronic signature. An option that allows borrowers to electronically sign a document online. The borrower must read and agree to the necessary consent and disclosure statements.

FAFSA/Free Application for Federal Student Aid - The free form that must be completed by students and parents applying for federal student aid.

Financial Aid Package - The combination of financial aid (loans, scholarships, grants, work-study) determined by the financial aid office of a college or university, communicated to the student through an Award Letter.

Forbearance - Temporary adjustment to the repayment schedule for a specific period of time for cases of financial hardship.

Grace Period - A specified period of time between the date a student graduates or drops below half-time status and the date the loan repayment begins.

Independent Student - A student who is married, 24 years of age or older, is enrolled in a graduate or professional education program, has legal dependents other than a spouse, is an orphan or ward of the court, is currently serving on active duty in the U.S. Armed Forces for purposes other than training, or is a veteran of the U.S. Armed Forces.

Interest - A dollar amount, calculated as a percent of the principal loan amount, that is charged for borrowed money.

Interest Rate - The rate paid on borrowed money, which is expressed as a percentage of the amount borrowed.

Lender - A financial institution, agency, or school that provides the loan to a borrower.

Loan - A type of financial aid that is available to students and their parents. Student loan programs have varying interest rates and repayment provisions. Education loans must be repaid.

London Interbank Offered Rate (LIBOR) - LIBOR is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale money market. Most lenders use the three-month LIBOR to set their interest rates.

Minimum Monthly Payment - The smallest monthly payment you can make to keep your account in good standing..

MPN/Master Promissory Note - The promissory note a student signs when taking out a ​Direct Loan. The Master Promissory Note covers both the subsidized and unsubsidized Federal Direct Loans the student may receive for the same enrollment period. If the student is attending a 4-year or graduate school, the Master Promissory Note also covers subsidized and unsubsidized Direct Loans the student may receive for future enrollment periods.

Origination Fee - A fee, typically paid by the borrower to the lender, that is generally used to fund the costs of administering a loan. Origination fees are often deducted from the principal loan amount prior to the loan's disbursement.

Perkins Loan Program - A federal loan available to undergraduate and graduate students. The loan is a campus-based, low-interest loan, funded by the federal government and administered by the school.

PLUS Loan - Federally insured loans for graduate/professional students as well as parents of dependent students.

Prime Rate - A short-term interest rate quoted by a commercial bank as an indication of the rate being charged on loans to its best commercial customers. Banks and other lenders frequently charge more than the quoted prime rate.

Prime Interest Rate - Interest rate set by the Federal Reserve. Currently this rate is 8.0%.

Principal - The amount of money borrowed, or the amount that remains unpaid, on a loan.

Promissory Note - The legal and binding document the borrower(s) are required to sign prior to loan funds being disbursed. The promissory note states all terms and conditions of the loan.

Reference - A lender generally will ask a borrower to provide the names, phone numbers, and addresses of at least two individuals to be used as references for the borrower.

Repayment Term - The period of time as stated in the promissory note over which a borrower agrees to repay a loan.

Variable Interest Rate - An interest rate that changes periodically over the life of the loan, often based off of Treasury bill rates, the Prime rate, or the Labor rate.

Many lenders will add a percentage onto the rate they are using. For example, if a lender's interest rate is Prime +1, this would result in a rate of 9% -- 8% +1%. Make sure you check the lender's web page or speak to a representative to determine what the actual interest rate will be.


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