Glossary of Financial Aid Terms

Academic Year
The period of time used by schools to measure one year of academic study. It can vary from one school to another but this will never be longer than one calendar year.

Adjusted Gross Income
Taxable income from all sources (from the Federal Income Tax Form 1040, line 3).

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Award Letter
The notice from the financial aid office specifying all the financial aid students have been awarded.

Bankruptcy
A legal action in which an individual or business gives up all or most of its assets. Most federal student loans cannot be discharged in a declaration of bankruptcy.

Co-Signer
A person signing a promissory note with the borrower is held equally responsible for loan repayment.

Cost of Attendance
The total amount of money it will cost you to attend a school. The COA will include fees, room and board, cost of books, transportation and more-everything that you will have to pay money for during the academic year. It is usually estimated by schools as a service to students.

Credit History
The record of debt (including past and present debts), as documented by credit bureaus.

Debt to Income Ratio
A formula used by private lenders to determine whether or not a student will be able to repay a prospective loan.

Default
Failure to repay the loan according to the terms you have agreed to with your bank or other lending institution. If you miss one payment, this can be considered default and can have serious repercussions for your credit rating and more.

Deferment
A period of grace, sometimes granted for special cases, during which a borrower will not be required to make payments. You are more likely to get deferment of a federal loan than with a private loan.

Department of Education
This is the federal body that processes all student financial aid applications.

Direct Costs
Any fees or costs directly billed to students (and likely not covered by financial aid).

Eligible Program
In most cases, this simply means a program or course of studies at a university accredited by a recognized body. There are some cases where professional certification courses for teachers are also considered eligible for federal financial aid.

Entrance Counseling
This is required for first time Stafford Loan borrowers. The session concerns all the basic information you will need in order to deal with your loan.

Exit Counseling
Like "Entrance Counseling," this is mandatory. Before you graduate or at the time of graduation you will meet with a financial aid officer of the school to get detailed info on your loans, the institution(s) in charge of them, and payment alternatives you may have.

Expected Family Contribution (EFC)
Based on previous income and the inventory of assets provided by your family, this will be the amount your family should be able to contribute to your education. This will be taken from information on your FAFSA. This can follow an Institutional Methodology or a Federal Methodology. Read more [url "What is Financial Need"]

FAFSA
See Free Application for Federal Student Aid below

FDSLP
See Federal Direct Student Loan Program below

Federal Direct Student Loan Program (FDSLP)
A federal program that deals loans "directly" through schools instead of lending funds through banks or other institutions. Schools in which these funds are available are called "Direct Lending Schools."

Federal Family Education Loan Program (FFEL)
A collective name covering Federal Stafford and PLUS loan programs.

Federal Pell Grant
A grant from the federal government. As a grant, it does not need to be repaid. The award amount is based on demonstrated need.

Federal PLUS Loan
A federally guaranteed loan for parents. Parents who pass a simple credit check can borrow money to aid students. The interest rate varies and the loans usually are repaid beginning immediately (no grace period).

Federal Stafford Loan
A loan that allows students to borrow federally guaranteed funds from a private lender.
Payments can be deferred while the student is still in college or university.

Federal Supplemental Education Opportunity Grant (SEOG)
A federal grant to supplement the Pell grant, where students can demonstrate need. Only certain colleges award this grant, within strict guidelines.

Federal Work Study (FWS)
A program funded by the federal government in which students work (usually on campus) to fund their education.

FFEL
See Federal Family Education Loan Program above.

Financial Aid Package
The total amount of federal aid you receive, in loans and grants. This is put together by an administrator in the financial aid office of the school you are attending.

Financial Need
A specific term referring to the difference between the Cost of Attendance and the Expected Family Contribution.

Forbearance
The temporary postponement of payments during which the borrower pays only interest on the loan.

Free Application for Federal Student Aid (FAFSA)
The official application form for all federal financial aid for students.

Grant
Financial aid award that does not have to be repaid. Quite often, this is based on the merit of scholarship or research in a selected area.

Guaranty Agency
Any agency (often a financial institution) that administers Federal Family Education Loans (FFEL) in your state.

Income Sensitive Repayment
Some federal loan borrowers can have their loan payments tailored to their income amount, in special cases. You must apply for this annually and provide documentation to demonstrate need for this consideration-usually information from income tax forms.

Indirect Costs
Any cost that is not billed or incurred through the College, such as transportation fees and other miscellaneous costs.

Interest Rate
The charge added onto a loan to help cover the cost and risk of lending. The interest rate on federal loans is set once per year, on July 1st.

Loan Servicer
After a loan has been approved, disbursed (and guaranteed) it is transferred to a loan servicing agency who manages your account until your debt has been paid in full.

Loans
Financial awards that a student must repay, usually with interest.

National Student Loan Data System
The US Department of Education tracks the progress of student loans. You can find out about aid you have previously received, loan and grant amounts, as well as the status of any new loans, simply by getting a PIN.

Origination fee
A fee paid by the borrower to the lender when the loan is originated. The fee can be as much as 3% of the principal balance of the loan. The origination fee is most often associated with federal loans like the Stafford, PLUS and Federal Direct Student loans.

Pell Grants
A grant distributed by the Federal Government for students demonstrating financial need.

Perkins Loans
A loan in which the college acts as the lender, with funds provided by the federal government. This loan is based on exceptional financial need.

Promissory Note
A binding legal document signed by you and others, when you receive your student loan.

Scholarship
A financial award that does not have to be repaid. It may come from within the college or university or from an outside agency.

SEOG
See Federal Supplemental Education Opportunity Grant (SEOG) above.

Standard Repayment
A borrower pays the same monthly payment over the entire term of loan repayment.

Stafford Loan
Subsidized and unsubsidized, this loan is borrowed from lending institutions with funds guaranteed by the federal government. When it is subsidized, the federal government pays interest while the student is in school. When it is unsubsidized, the student's needs are not taken into consideration, but interest accrues while he or she is in college or university.

Work Study
See Federal Work Study above.

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