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Glossary of Financial Aid Terms

A | B | C | D |  E | F | G | H |  I | L | M |  N  | O  | P | R | S | V  | W

A

Accrued Interest
The interest that is added to the unpaid principal balance of your loan. If your loan is unsubsidized, you can choose to pay the interest while you¹re in school. 

AGI
Adjusted Gross Income

Alternative Loan
Usually an unsubsidized loan that is not insured and is used to supplement other less expensive loan programs (also referred to as an private loan).

Amortization
The reduction and retirement of a debt through periodic payments of interest and principal.

APR (Annual Percentage Rate)
A percentage calculation that reflects the total cost of a loan (interest plus all fees) on annual basis.

B

Borrower
The individual who applies for a loan and receives the proceeds of the loan.

C

Capitalization
The adding of unpaid interest to the principal balance. Your unpaid interest the accrues additional interest as part of the loan principal. Capitalization generally happens when your loan enters repayment.

Certification
A process by which the college, university, trade school or vocation school verifies that a student is enrolled on at least a half-time basis, is making satisfactory academic process and is therefore eligible for federal and private loans. Certification must be made prior to any disbursement of funds.

Co-borrower
An individual who signs the promissory note in addition to the borrower and is equally responsible for the obligation if the borrower doesn’t pay.

COA | Cost of Attendance
The total cost of attending a post-secondary institution for one academic year. This usually includes tuition, fees, room, board, supplies, transportation, and personal expenses.

Consolidation
The combination of several loans into one new loan.

Cosigner or Endorser
A person who signs the promissory note in addition to the borrower and is equally responsible for the obligation if the borrower doesn’t pay.

Credit
Time given for payment for services sold on trust and the demonstration of one¹s integrity, willingness and ability to meet the payments on these financial obligations.

Credit Bureau Scoring
A quick and consistent method of determining the likelihood that you will repay your loans. It is an evaluation tool that predicts how well you will manage credit, relative to other borrowers, based on your past credit performance. (e.g. promptness in paying bills, number of credit cards, total credit limit, and the amount owed on accounts)

Credit Rating
The rating given to an individual to evaluate his or her credit risk based on past records of debt repayment.

Credit Report
A summary of your credit history. Credit reports include information such as current and recent addresses, employer information, payment performance for seven years, available credit, etc.

Credit score
A number, generally between 300 and 800, that reflects the credit history shown in a borrower’s credit report. This score is considered predictive of the borrower’s future credit performance.

D

Default
Failure to repay a loan according to the terms of the promissory note.

Deferment
The postponement of repayment of principal and/or interest. Deferment is not automatic; you must apply to your lender or loan servicer and qualify under specific guidelines.

Deferred Interest
Interest that accrues, but on which payment is delayed until a later date. Such deferred (accrued) interest may be capitalized.

Delinquency
Failure to make a payment by the due date.

Disbursement Date
The date your lender issues you student loan funds.

Disclosure Statement
A form sent by your lender at the time of loan approval or disbursement. It includes information about your loan; amount approved, the interest rate, amounts of guarantee and origination fees and your federal rights and
responsibilities.

Discretionary Income
For Income-Based
Repayment and Pay As You Earn, discretionary income is the difference between your income and 150 percent of the poverty guideline for your family size and state of residence.

E

EFC(Expected Family Contribution)
An amount determined by a formula that is specified by law, that indicates  how much of a family¹s financial resources should be available to help pay  for school. Factors such as taxable and non-taxable income, assets (such as savings and checking account), and benefits (for example, unemployment or Social Security are all considered in this calculation. The EFC is used in determining eligibility for Federal need-based aid.

Endorser
A person who signs the promissory note in addition to the borrower and is equally responsible for the obligation if the borrower doesn’t pay.

Entrance Interview
A loan repayment and debt management counseling session required by federal regulations that is arranged and conducted online for students who are receiving their first federally guaranteed student loan associated with their attendance in school. This counseling session must be done before the student can receive the proceeds of the first disbursement of any federally guaranteed education loan.

Extended Repayment Plan
It allows loan repayment to be extended over a period from generally 12 to 30 years, depending on the total amount borrowed.

Exit Interview
A loan repayment and debt management counseling session required by federal regulations that is arranged and conducted online for students who have received federally guaranteed loans while attending. This counseling session must be done before the student graduates or leaves the school, whenever possible.

F

FAFSA | Free Application for Federal Student Aid
The free form that must be completed every year by students and parents applying for Federal student aid.

FDLP (Federal Direct Loan Program)
Stafford and Graduate PLUS loans that are available directly from the federal government rather than through a commercial lender.  All Stafford & Graduate Plus loans are through the federal government.

Financial aid
Financial assistance including scholarships, grants, work-study and loans for education.

Financial aid award letter
A letter detailing total amount of financial aid for which a student may be eligible.

Financial need eligibility
The difference between the Cost of Attendance (COA) at a college and the Expected Family Contribution (EFC).

Fixed Rate Interest
An interest rate that remains the same throughout the life of the loan. 

Forbearance
A period of time (six months to no more than a year at a time) when borrower is not required to make payment on the loan, or the scheduled payment will be reduced. Interest accrues on all loans during forbearance.

G

Garnishment of Wages
The deduction of a portion of a borrower¹s paycheck, by his/her employer, with or without the borrower¹s consent. A lender or the government may take this action to force repayment of a loan that is in default.

Gift aid
Financial aid, such as grants and scholarships, that doesn’t need to be repaid.

Grace Period
A period of time when the borrower is not required to make payment on the loan (length of time is tied to the terms of the promissory note).

Graduated Repayment
Loan repayment that is lower at the beginning of repayment and increases in steps during the repayment period.

Grants
Financial aid awards that don’t have to be repaid. Grants are available through the federal government, state agencies and colleges.

Guarantee
To insure a loan against loss by a lender as a result of a borrower¹s failure to repay.

Guarantee Fee
A percentage of principal charged to the borrower by the guarantor.

Guarantor
A state agency or non-profit organization that administers student loan programs. These agencies insure lenders against losses due to a borrower¹s default, death, disability or bankruptcy. Sometimes the lender is also the
guarantor.

H

Holder
The owner of a loan; the lender, institution, or agency that originate the loan and hold it¹s legal title

I

Income based Repayment (who are not new borrowers as of July 1, 2014)
Generally 15 percent of your discretionary income, but never more than the 10-year Standard Repayment Plan amount

Income Contingent Repayment
It bases monthly payments on your adjusted gross income (AGI) and the total amount of your Direct Loans. The repayment period for this plan will not exceed 25 years.

Independent student
A student who is either married, 24 years of age or older, enrolled in a graduate or professional education program, has legal dependents other than a spouse, is an orphan or ward of the court or a veteran of the U.S. Armed Forces.

Index
A financial instrument that provides the basis for the interest rate charged on a loan.  Alternative student loans are typically indexed to other widely accepted financial instruments, such as the current LIBOR rate, the current T-bill rate, or the current Prime rate.

Institutional Loan
Loans that are offered to students of some schools based on a variety of criteria that may or may not include financial need (most tend to have favorable terms, which are stated in the promissory note).

Interest Cap
A set limit on the interest on a loan.

L

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

Lifetime Learning Tax Credit
A tax credit for post-secondary education courses. Only one credit may be claimed per tax year. To claim this credit, the individual (or in the case of a dependent child, the parents) must file a tax credit and owe taxes for that tax year.

LIBOR
LIBOR is an acronym for the London Interbank Offered Rate. It is the average  of the interest rates paid on deposits of US Dollars in the London, England financial market. Current rates are listed at: www.bloomberg.com

Loan Limits for Stafford Loans
The overall limit for Stafford subsidized and unsubsidized loans is $224,000 for a professional health students, including Stafford loans for undergraduate study.

Loan Fees
Costs associated with the processing and collection of the loans that are usually deducted from the loan prior to disbursement and vary according to the type of loan.

Loan Servicer
A company that collects payments, responds to customer service inquiries, and perform other administrative tasks associated with maintaining a student loan on behalf of a lender.

M

Maker
The borrower of the loan.

Master Promissory Note (MPN)
Replaces Federal Stafford Loan Notes. It simplifies the yearly borrowing process with a multi-use feature. Depending on the school, you may be able to reuse the same note to request additional funds on a multi-year basis.  UF uses the Direct Loan MPN.

N

Need
The difference between the Cost of Attendance and the Expected Family Contribution (EFC) is the student’s financial need.

O

Origination Fee
A processing fee calculated as a percentage of principal. It may be deducted from the loan at time of disbursement or added to the principal.

P

Pay as you Earn Repayment
Generally 10 percent of your discretionary income, but never more than the 10-year Standard Repayment Plan amount

Promissory Note
A legal document signed by the borrower. It describes the conditions under which the loan is made and the terms of loan repayment.

Principal
The original amount borrowed on  loan.

Private Loan
Usually an unsubsidized loan that is not insured and is used to supplement other less expensive loan programs (also referred to as an alternative loan).

R

Reference
A lender generally will ask a borrower to provide the names, phone numbers, and addresses of at least 2 individuals to be used as references for the borrower.

Repayment Disclosure Statement
A statement of repayment terms of the loan that is required to be sent to the borrower prior to the due date of the first payment of loan.

Repayment Schedule
A statement of repayment terms which is sent to the borrower prior to the due date of the first payment of the loan.

S

SAR | Student Aid Report
A report, summarizing financial and other information reported on the FAFSA, sent to a student by the federal government. The student’s financial aid need is indicated by the Expected Family Contribution (EFC), which is printed on the document.

Scholarships
Scholarships are funds used to pay for higher education that don’t have to be repaid, and are based on any number of criteria, such as academics, achievement, talents, or through various groups.

Servicer A company that handles billing, collections, deferments and other administrative duties for the lender or holder.

Standard Repayment Plan
It requires fixed monthly payments (at least $50) over a fixed period of time (up to 10 years).

Subsidized Stafford Loan Limits
The overall limit for borrowed subsidized loans is $65,500 for graduate or professional study, including any undergraduate subsidized loans.  No longer available for graduate or professional students.

V

Variable Interest Rate
An interest rate that changes periodically throughout the life of the loan. Most alternative loans change every quarter.

Verification
A process used to make sure that the information students report on their FAFSA is accurate.

W

W2 Form
The form that lists an employee’s wages and taxes withheld. The IRS requires employers to issue a W2 for each employee before February 28.