Financial Aid Glossary

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24/7 Application Processing

Lender accepts applications and can do preliminary approvals of applications seven days a week, all day and evening.

A

Accreditation

In higher education, the process by which colleges and universities are reviewed by independent third parties and deemed to have met specific standards. In order for an institution to be eligible for Title IV funding (part of the Higher Education Act of 1965), they must be reviewed and accredited by one of the regional accreditation agencies. This means that non-accredited institutions cannot provide federal financial aid to their students.

Additional Education Borrowing (Other Education Debt)

Refers to any other student loans – such as private student loans – that you may have that you cannot consolidate with your federal student loans. This amount has an impact on the length of extended repayment for federal consolidation loans. Note that this additional borrowing is not calculated as part of your consolidation loan.

Adverse Credit History

Adverse credit history, also called sub-prime credit history, non-status credit history, impaired credit history, poor credit history, and bad credit history, is a negative credit rating.

Lenders consider a negative credit rating as an increased risk that the borrower may not repay the loan. As a result, lenders must charge a higher interest rate on loans to people with adverse credit history to account for risk of default. Borrowers with a more positive credit history may qualify for lower rates.

Adverse credit history can be caused by being in default on a previous debt, being more than 90 days late on any debt, or bankruptcies. It is not the same as having a low credit score.

Alternative Loans

See Private Student Loans.

Amortization

The process of paying back a loan over a given set of months. Re-amortization means that once a borrower reward is applied to the loan, the loan will be recalculated to generate a new monthly payment amount.

Amount of Loan

The amount of the loan is the maximum amount you wish to borrow as requested on a student loan application. You may borrow up to the student’s cost of attendance for the current (or upcoming) school year minus any financial aid, scholarships and federal loans awarded during the period of enrollment.

The Cost of attendance includes tuition and fees, room, board, books, miscellaneous expenses and transportation. This number is established by your school’s financial aid office. Subtract any financial aid, grants, scholarships or student loans from the cost of attendance and the remaining difference is the maximum amount of additional loan funding you can be approved for. This is done to prevent students from borrowing far beyond the actual costs of college, and to put a cap on the amount of refund checks being given to students.

If your private student loan funding is needed for additional living and supply expenses make sure that your loan amount meets the cost of attendance. This ensures you are receiving the maximum refund available. Be advised that you may return any excess refund money to your lender in the form of a payment if you do not need it.

Example: XYZ University Cost of Attendance: 44,000. Financial Aid Awarded: $30,000. $44,000 – $30,000 = $14,000 maximum loan amount available.

APR (Annual Percentage Rate)

Takes into account principal, interest rate and structure, fees and length of repayment when determining the interest that accrues on a loan. Some lenders offer various borrower rewards (or borrower benefits) that might result in a lower effective APR. It is important to use APR to help compare one loan to another. The APR on a loan can vary among lenders because of differences in up-front fees, deferment periods, capitalization of interest, interest compounding, loan terms, and repayment terms, even if the interest rates are the same.

Auto-Debit

Setting up a payment by having it automatically withdrawn from a checking or savings account. Using auto-debit has become standard practice for making payment on student loans, mortgages and credit cards safely, securely and predictably. Once an auto debit is established, a set amount of money is withdrawn from the account on a recurring monthly basis until the debt is fully paid. Eligible dates for auto debits are typically between the 1st and 28th of the month.

B

Bankruptcy

A legally declared inability or impairment of ability of an individual to pay creditors. There are many different kinds of bankruptcy that can have different effects on student loans. Consult with a financial advisor for more information about bankruptcy.

Bar Study Loans

Loans providing funds to be used to pay for expenses related to studying for and taking the Bar Exam (the qualifying exam for practicing lawyers). Borrowers can take out a loan to cover living expenses for the time relevant to preparing for and taking the Bar Exam, but check with your selected lender for any limitations.

Base Rate

The interest rate that applies before any borrower rewards (or borrower benefits) are included.

Base Repayment Length

Each loan has a maximum amount of time over which you can repay the loan. In many cases, if you earn borrower rewards (or borrower benefits), the loan repayment term will be shorter than this base length. You can also choose to make additional payments to repay the loan more quickly. In general, loans with longer base repayment lengths will have lower monthly payments, but a higher total cost.

Benefits Lost if Lender Sells Loan

Note that some borrower rewards offered on this loan may be lost if the lender sells your loan. Be sure to ask the lender for details on this policy before assuming borrower rewards cannot be lost.

Borrower

Person legally responsible for repaying a loan and who has signed the promissory note.

Borrower Benefits

See Borrower Rewards.

Borrower Rewards

Also called borrower benefits or loan discounts. Many lenders offer these incentives to encourage borrowers to repay the loans in a responsible way.

Rewards can save borrowers a great deal of money during the course of repayment as long as they are properly utilized.

The most common type of borrower reward is a loan interest rate reduction earned when the borrower makes a certain number of on-time payments or sets up automatic debit of their monthly payment.

Some borrower rewards are applied automatically, meaning that you receive the benefit just for getting the loan. For example, some lenders offer an up-front interest rate reduction – a benefit that is automatically calculated when the loan begins.

Be advised that borrower benefits may be lost if you stop meeting requirements to receive them. You should ask your selected lender for details about borrower rewards, including requirements to qualify and/or to later be disqualified for them.

C

Cancellation

The release of a borrower from the obligations to repay all or a portion of a loan. Borrowers must meet certain requirements, which may vary from lender to lender.

Capitalized Interest

Unpaid, accumulated interest that is added to the loan principal. When principal increases, so does the total cost of loan repayment. Lenders may add interest back to the principal at varying intervals. Check with your lender for more specific information.

Certified Private Loan

A private loan that requires a school official to confirm the student’s eligibility before disbursement.

Certification is normally completed by the financial aid staff and will include information like the cost of attendance and the registration status of the student.

Certification ensures that the student is not over-awarded in total funding beyond the cost of attendance. After being disbursed to the school the funding is applied to the student’s account. After the tuition balance is paid any remaining loan funding is returned to the student as a refund. Ask the financial aid office at your school how the refund process is handled.

Citizenship (U.S.)

The status of people who indicate that they were born in the United States, Puerto Rico, a U.S. Island Area, or born abroad to a U.S. citizen parent(s). People who indicate that they are U.S. citizens through naturalization are also citizens.

Some loans may not be available to borrowers who are not U.S. Citizens or Permanent Residents and/or who do not have a co-signer who is a U.S. Citizen or Permanent Resident. To receive federal student aid, you must be a U.S. citizen

U.S. citizenship eligibility

• U.S. national (includes natives of American Samoa or Swain’s Island)
• U.S. permanent resident who has an I-151, I-551, or I-551C (Alien Registration Receipt Card)
• To learn more, review literature from the U.S. Department of Education

Co-signer

A joint signer of a promissory note for a loan, also called a co-borrower. The co-signer assumes responsibility of the repayment of the loan if the primary borrower is unable to repay. It is strongly advised that undergraduate students apply for a private loan with a credit-worthy co-signer to increase chances of approval and of obtaining a lower interest rate.

If you are a student without sufficient personal income or credit history you’ll almost certainly need to apply with a credit-worthy co-signer.

A credit-worthy co-signer is someone with a good credit history and good credit score, such as:

• A parent
• A guardian
• A grandparent or other relative

Co-signer Release

The release of the co-signer from any responsibility over the repayment of an outstanding loan that they previously signed for. Co-signer release is an important option for student loans as it can remove debt obligations from the co-signer, but specific requirements must be met before it is approved.

Typically, the primary borrower must make a certain number of on-time payments, and then must be credit approved on a stand alone basis before the co-signer can be released. Confirm with your lender the exact requirements, and make sure the co-signer is aware of this option.

Compounding Interest

With a loan, this is the practice of charging interest on the total balance of the loan and on any interest that has already accumulated.

Consolidation Loan

A consolidation loan is when one large loan is used to pay off several smaller loans. Consolidation may offer a superior interest rate over the several loans outstanding helping borrowers save a great deal on interest costs during repayment. By requiring only one monthly payment, a consolidation simplifies the debt elimination process making it more manageable.

Consolidation can also provide cash flow management by extending the term of the loan to allow smaller monthly payments. However, lower monthly payments mean higher overall cost for debt repayment, so consider your options carefully. It is recommended that Federal student loans use the Federal student loan consolidation program while private student loans should use a private student loan consolidation.

Continuing Education Loans

Loans specifically for students in non-degree programs (not leading to a degree to certificate).

Continuing education students’ eligibility for certain loans and loan amounts can depend on their enrollment status. Check with your school about how enrollment status is defined. Compare Continuing Education Loan options.

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Cost of Attendance

The cost of attendance is the sum total of all costs associated with the attendance of a particular school. This number is established by the school’s financial aid office and includes tuition and fees, room, board, books, transportation and miscellaneous expenses. Every school has a slightly different cost of attendance, but all must meet standard guidelines as set by the U.S. Department of Education. The cost of attendance represents the maximum amount of financial aid, grants, scholarships and student loans that can pay to an account during an academic period. This prevents students from applying for an excessive amount of student loans beyond the established cost of attendance.

Credit Check

A process where a person has their credit report reviewed before the approval of a loan application is authorized. Financial institutions will review a credit report from one or more of the three leading credit reporting agencies, Equifax, Experian and TransUnion.

Credit Inquiry

See Credit Check.

Credit Rating

See Credit Score.

Credit Report

A detailed report outlining the credit history of an individual which includes current and previous debts, payment amounts, late payments, past due amounts and other related information on every credit source the individual has used. The three largest credit reporting agencies are Equifax, Experian and TransUnion.

Credit Score

Also called a credit rating. A number, roughly between 300 and 800, that measures an individual’s credit worthiness. This score represents the answer from a mathematical equation considering various pieces of information in your credit report. The lower your credit score, the more likely you are to default on your debt. Most lenders rely on your credit score to determine eligibility for private loans. Your credit score can also affect the cost of your debt, with lower interest rates and fees reserved for borrowers with better credit scores. The most well-known type of credit score is the FICO® score.

Credit Sensitivity

How much lenders depend on a borrower’s credit score when determining approval and rates or fees of an offered loan. Some loans are more credit-sensitive than others. In general, federal loans, such as Stafford Loans, are available regardless of your credit score, and as such should be the first choice for borrowers who have a limited or poor credit score. Private loans may be attractive options, but they have restrictions on who can qualify for them and may have higher rates and fees the worse your credit score is.

D

Debt-to-Income Ratio

Known as DTI, debt-to-income ratio measures a borrower’s total debt compared to the borrower’s overall income. Having a high debt-to-income ratio can be reason for loan application denial.

Default

Failure to repay a loan in accordance with the terms of the promissory note. Once you are delinquent for a certain period of time (usually 270 days for federal loans), your lender will declare the loan to be in default. The entire loan balance will become due at that time. If you default you are not eligible for new loans and grants. For federal loans the government can also seize tax refunds, garnish wages without a court order, take a portion of Social Security payments, and charge very large collection fees. Both federal and private loans cannot be discharged in the event of a bankruptcy.

Default Fee

A mandatory fee charged to a borrower by a lender to pay the guarantor of a federal student loan as insurance against default. Default fees are charged as the loan is disbursed and can be no more than 1% of the amount of the loan. Also known as an “insurance fee” and formerly known as a “guarantee fee”.

See also Fees, Origination Fee and Repayment Fee.

Deferment

The ability to postpone payment of a loan for a period of time due to specific reasons. Deferment is most commonly utilized by students registered for at least part time status to avoid full loan repayment. Loans may be eligible for deferment for a set number of months after graduating or exiting from a school, or for special circumstances. During this time, the unpaid interest on the loan will accrue. Confirm the details of loan deferment for each outstanding loan you have by contacting your lender.

Deferment Rate

A different, and usually lower, interest rate during the period in which the borrower does not have to make payments on a loan (called Deferment).

Delinquency

The failure to make payments when due, as specified in the promissory note and in the repayment plan the borrower selected. Delinquency can lead to default.

Dependent Student

A classification of a student for the purposes of the federal financial aid application. Most traditional college students are dependent – even if they are paying their own way through college or no longer have a relationship with their parents. The federal definition of an independent student is one who can answer yes to any of the following questions, for the 2010-2011 filing year:

• Were you born before January 1, 1987?
• Will you be working on a degree beyond a bachelor’s degree, such as a master’s or doctorate, in school year 2010-2011?
• As of the date you will be submitting the FAFSA, are you married? (Answer yes if you are separated, but not divorced.)
• Do you have children who will receive more than half of their support from you between July 1, 2010, and June 30, 2011?
• Do you have dependents (other than your children or spouse) who live with you and who receive more than half of their support from you, now and through June 30, 2011?
• At any time since you turned age 13, were both your parents deceased, were you in foster care or were you a dependent or ward of the court?
• Are you, or were you an emancipated minor as determined by a court in your state of legal residence at the time you received the determination?
• Are you, or were you in legal guardianship as determined by a court in your state of legal residence at the time you received the determination?
• At any time on or after July 1, 2009, did your high school or school district homeless liaison determine that you were an unaccompanied youth who was homeless?
• At any time on or after July 1, 2009, did the director of an emergency shelter or transitional housing program funded by the U.S. Department of Housing and Urban Development determine that you were an unaccompanied youth who was homeless?
• At any time on or after July 1, 2009, did the director of a runaway or homeless youth basic center or transitional living program determine that you were an unaccompanied youth who was homeless or were self-supporting and at risk of being homeless
• Are you a veteran of the U.S. Armed Forces?
• Are you currently serving on active duty in the Armed Forces for other than training purposes?

Applicants who answer “no” to all of these questions are dependent students and are required to report parental information on the application.

Be aware that you are not automatically independent for financial aid purposes simply because your parents stop claiming you as a tax exemption or refuse to give you support for your college education. Your parents’ unwillingness, inability or reluctance to help pay for your educational costs does not make you independent. Becoming emancipated or qualifying for in-state tuition at a public institution also does not mean that you are independent for federal financial aid purposes. In cases where you do not qualify as an independent student but you receive no parental support, counselors in the financial aid office can provide you with information about alternative financing and employment opportunities to help you pay for your college expenses.

See also Independent Student.

Direct Lending

See Direct Loans.

Direct Loan Servicing Center

The federal agency that collects Direct Loans as it processes payments, deferments, forbearances, and repayment options.

Direct Loans

Loans made by the U.S. Department of Education (instead of a private lending institution) under the William D. Ford Federal Direct Student Loan Program. For the 2010-2011 academic year and beyond, the only available federal loan program is Direct Loans.

Direct Loans consist of Direct Subsidized Stafford Loans, Direct Unsubsidized Stafford Loans, Direct PLUS Loans and Direct Consolidation Loans. A student must file the FAFSA form in order to qualify for any loans through the Direct Loans program.

In order for a school access Stafford loans and plus loans for their students they must register with the Direct Loan program. With the passing of The Health Care and Education Reconciliation Act of 2010 (HCERA, P.L. 111-152, 3/30/2010) the Federal Family Education Loan Program (FFELP) was eliminated. No longer can private banks lend to students through the Stafford or Plus loan program.

Disbursement

When a lender transmits funds on a student loan to the school on behalf of the borrower. Federal loans will always be disbursed directly to the schools. The majority of private loans disburse directly to the school as well. Disbursement can be done through electronic funds transfer, or by mail delivery of a paper check. The date of disbursement is normally determined by the school’s financial aid office through loan certification.

Discharge

The release of a borrower from the responsibility of repaying a loan or debt.

E

Effective Rate with All Borrower Rewards

The rate on your loan once you have earned or qualified for all of the available borrower rewards or benefits.

Endorser

Someone responsible for repayment of a loan if the primary borrower does not pay as agreed; the endorser is secondarily liable for the debt. An endorser is similar to a co-signer, but typically only used for federal PLUS Loans. Individuals borrowing PLUS Loans may be required to obtain an endorser.

Enrollment Status

The number of credit hours for which a student is registered. This status determines a students’ eligibility for certain loans, financial aid and scholarships and will determine the cost of attendance. Full-time student status is generally 12 credits per semester or greater while half-time status is usually 6 credits per semester. Check with your school about how enrollment status is defined.

Entrance Interview

The Entrance Interview is an explanation of your Direct student loan obligation and a review of your agreement. It must be completed before your federal loan is authorized for disbursal.

See www.studentloan.gov for completion.

eSignature

An electronic signature or the electronic equivalent of a hand-written signature. eSignature has become standard practice for many products and services as it serves the same purpose as signing a contract, but completed digitally.

eSignature-Capable

This indicates that the lender offers eSignature for this loan product.

Expected Family Contribution (EFC)

The Expected Family Contribution (EFC) is how much money the Department of Education and the schools expect you and your family to contribute toward your school costs for an academic year.

The EFC is determined after submitting required data on the Free Application for Federal Student Aid (FAFSA) and will dictate eligibility for virtually all need based funding resources.

The EFC of 0 (Zero) dollars is the lowest possible available. The lower your EFC, the more likely you will qualify for need based funding.

The following information is considered on the FAFSA when calculating the Estimated Family Contribution. Read the FAFSA carefully and answer the questions accurately to ensure you receive the correct EFC.:

• family size
• number of family members in college
• family savings
• current earnings
• certain assets and investments

Expected Graduation Date

The month and year you expect to graduate from your academic program. Loan applications ask for this date to know when you will complete your degree program, however this date is not set in stone. Your expected graduation date can change based on academic progress towards a degree.

F

FAFSA

The U.S. Department of Education’s Free Application for Federal Student Aid (FAFSA) is the first step in the financial aid process.

Use it to apply for federal student financial aid, such as a Pell grant, student loans, and college work-study.

In addition, most states and schools use FAFSA information to award their financial aid.

You can file your FAFSA for free at the Department of Education’s website, http://www.fafsa.ed.gov.

It is recomended that your first file a FAFSA to confirm financial aid eligibility before applying for private student loans to cover tuition balances.

Federal Family Education Loan Program (FFELP)

The now defunct federal program that controlled and regulated federal student loans through approved institutions of higher education. FFELP loans included Stafford Loans (subsidized and unsubsidized), PLUS Loans, and federal consolidation loans. With the passing of The Health Care and Education Reconciliation Act of 2010 (HCERA, P.L. 111-152, 3/30/2010) the FFELP program was eliminated. The Direct Loan program is the only source for federal Stafford, Plus and consolidation loans today.

Federal Student Loan Consolidation

Combining one or more federal student loans into one consolidation loan.

See Consolidation Loan.

Federal Student Loans

Loans offered to students to assist in the payment of the costs of higher education that are supported and regulated by the federal government.

Examples include the subsidized and unsubsidized Stafford loan, the Parent Plus loan, the Graduate Plus loan, and the Federal Consolidation loan.

Federal loans are processed through the Direct Loans program and normally require the completeion of a Master Promissory Note and Entrance Interview. Federal student loans offer fixed interest rates as well as flexible repayment options.

See also Student Loans.

Fee Paid From

There are two methods that determine how fees are handled in a loan. The fee can be paid from the proceeds or added to the principal. Federal loans have their fees paid from proceeds, while private loans usually have the fee added to the principal. As an example, with a $10,000 loan with a 5% fee, if the fee is paid from proceeds, you would receive a check for $9,500, and the principal amount of the loan would be $10,000. If the fee is added to the proceeds, you would receive a check for $10,000, and the principal amount would be $10,500.

Fees

Many loans involve additional charges or fees. The most common fee associated with student lending is the origination fee. This fee is a percentage of the requested loan amount and can range from 0.5% to 3.0%.

An origination fee can be added to the requested amount of the loan. For example, if the borrower requests $10,000 with a 1% origination fee, the total amount of debt to be repaid is $10,100.

An origination fee can be deducted from the amount borrowed. For example, if the borrower requests $10,000 with a 1% origination fee, the lender sends a net loan amount of $9,900 to the school. However, the borrower is responsible for repaying the $10,000 loan request amount.

Be advised that cuStudentloans does not charge an origination fee with the private student loan offered. Consult your selected lender to determine if any additional fees are associated with your loan.

Financial Aid

The monetary support a student receives from federally and privately funded sources to attend college. Financial aid can include loans, grants, scholarships, and work-study programs.

First Payment Due

An estimate of when the first payment on this loan will be due based on several factors.

• The type of loan.
• When repayment begins for the loan as determined by the lender.
• The date you entered for graduation, if repayment begins at graduation. If you don’t know, enter an estimated date to use the timeline as a guide.
• The grace period offered by the lender.

This date should be viewed as an estimate; your lender will provide you with specific repayment terms and schedules.

Fixed Interest Rate

A loan expense charged to a borrower for the use of borrowed money at a percentage that does not change over time. A fixed interest rate remains the same during the repayment of the loan.

See also Interest Rate and Variable Interest Rate.

Forbearance

A debt management provision offered by many lenders whereby payments on the loan in question are temporarily suspended.

A forbearance may allow you to temporarily stop making payments on your loan, temporarily make smaller payments, or extend the time for making payments.

Forbearance is not automatically granted and requires documentation of financial hardship or other unusual circumstances. Even when forbearance is granted, the suspended payments will still be due later along with any interest accrued on the suspended payments. For information on federal student loan forbearance start with their website at http://www.direct.ed.gov/inrepayment.html or contact the lender or current servicer of your loan.

If you are concerned that you will not be able to repay your loan, you should contact your lender to inquire about the possibility of deferment or forbearance. Make this inquiry before you miss payments. In most cases, if you default on your loan, you are no longer eligible for a deferment or forbearance.

Full Deferment

A period of time where the borrower pays neither interest nor principal on a loan. Full deferment is often available for federal and private student loans while a student is enrolled in school for a half-time status or greater.

Funds Disbursed

See Disbursement.

G

Grace Period

The time between a student leaving the educational program for which they borrowed, such as graduation, and when the borrower is required to begin loan repayment. For loans in the student’s name, this is typically 6 months after graduation.

Once grace period is used up, it is not renewed. For example, if a student leaves college for one year, the 6 month grace period is activated and then loan repayment begins. Once the student re-enters school at a half-time status or greater, loan repayment can be deferred. When the student graduates or leaves school again, loan repayment begins again immediately without a grace period.

During this time, interest may still accrue on the loan. The grace period is effectively an extension of the deferment.

Graduate PLUS Loans

Federally guaranteed loans that are available to graduate and professional students.

You might want to choose a Grad PLUS loan if:

• You like the certainty that a fixed-rate loan provides.
• Your credit is good, fair, or poor (your cost will likely be lower than through a private loan).
• You like the protection that the greater deferment and forbearance options provide.
• The repayment incentives offered may bring the repayment interest rate cost to a lower rate than currently available from private loans.

You might want to choose a private loan instead if:

• You are comfortable with the possibility of interest rates increasing beyond the interest rate cap of the Grad PLUS loan
• You have an excellent credit score. Such borrowers may be charged a lower interest rate than that of the fixed-rate Grad PLUS program, but if interest rates climb, this benefit decreases or disappears altogether.
• You believe that there is little possibility that you would use the deferment or forbearance options.
• You plan to repay the loan within a short period of time.

A credit check is required, but only for adverse credit history, not for credit score.

Grant

A form of financial aid or monetary assistance that does not have to be repaid and is usually based on need.

Gross Annual Income

The total amount of money you earned (or your family earned) in a given year. Often used as part of the federal financial aid formulas to determine eligibility for certain kinds of aid.

Guarantor

An agency that specializes in protecting lenders from default costs. These agencies often act as a resource to aid the borrower in default prevention as well.

Guarantors were used in the Federal Family Education Loan Program (FFELP) to insure all federal loans issued against default and took measures to educate students about proper loan repayment.

Since the elimination of the Federal Family Education Loan Program (FFELP) in favor of the Direct Loans student loan program, guarantee agencies no longer process newly issued federal loans. However, they are still involved in guaranteeing any outstanding FFELP loan portfolios against default and will continue in this role until the last FFELP loan is paid in full.

Many guarantee agencies are diversifying into other areas, such as managing state grant and non-federal student loan programs, developing financial literacy training programs, and servicing federal education loans made through the Direct Loan program. The following is a brief list of Guarantors:

• American Education Services (AES)
• American Student Assistance (ASA)
• Connecticut Student Loan Foundation (CSLF)
• EdFund
• Educational Credit Management Corporation (ECMC)
• Finance Authority of Maine (FAME)
• Florida Office of Student Financial Assistance (OSFA)
• Great Lakes Educational Loan Services, Inc.
• National Student Loan Program (NSLP)
• USA Funds

H

Half-Time

Half-time registration status (or part-time) is generally considered 6 credit hours per term. Because enrollment requirements for half-time status can vary, you must confirm the answer with your schools financial aid office. Half-time status is generally the minimum registration required for federal and private student loan applications and also for eligibility for loan deferment.

Home Equity Loans

Loans where the applicant’s residence is used as collateral for a secure line of credit based on the available equity in the home (much like a second mortgage). Homeowners can borrow up to the current value of their home minus any outstanding amount owed.

I

Independent Student

A classification of a student for the purposes of the federal financial aid application.

The federal definition of an independent student is one who can answer yes to any of the following questions, for the 2011-2012 filing year:

• Were you born before January 1, 1988?
• Will you be working on a degree beyond a bachelor’s degree, such as a master’s or doctorate, in school year 2011-2012?
• As of the date you will be submitting the FAFSA, are you married? (Answer yes if you are separated, but not divorced.)
• Do you have children who will receive more than half of their support from you between July 1, 2011, and June 30, 2012?
• Do you have dependents (other than your children or spouse) who live with you and who receive more than half of their support from you, now and through June 30, 2012?
• At any time since you turned age 13, were both your parents deceased, were you in foster care or were you a dependent or ward of the court?
• Are you, or were you an emancipated minor as determined by a court in your state of legal residence at the time you received the determination?
• Are you, or were you in legal guardianship as determined by a court in your state of legal residence at the time you received the determination?
• At any time on or after July 1, 2010, did your high school or school district homeless liaison determine that you were an unaccompanied youth who was homeless?
• At any time on or after July 1, 2010, did the director of an emergency shelter or transitional housing program funded by the U.S. Department of Housing and Urban Development determine that you were an unaccompanied youth who was homeless?
• At any time on or after July 1, 2010, did the director of a runaway or homeless youth basic center or transitional living program determine that you were an unaccompanied youth who was homeless or were self-supporting and at risk of being homeless
• Are you a veteran of the U.S. Armed Forces?
• Are you currently serving on active duty in the Armed Forces for other than training purposes?

Applicants who answer “no” to all of these questions are dependent students and are required to report parental information on the application.

Be aware that you are not automatically independent for financial aid purposes simply because your parents stop claiming you as a tax exemption or refuse to give you support for your college education. Your parents’ unwillingness, inability or reluctance to help pay for your educational costs does not make you independent. Becoming emancipated or qualifying for in-state tuition at a public institution also does not mean that you are independent for federal financial aid purposes. In cases where you do not qualify as an independent student but you receive no parental support, counselors in the financial aid office can provide you with information about alternative financing and employment opportunities to help you pay for your college expenses.

See also Dependent Student.

Index

A single number calculated from an array of prices or of quantities. Indexes can be used to set interest rates.

See also Prime Rate and LIBOR.

Interest

A loan expense charged to a borrower for the use of borrowed money. Interest is calculated as a percentage of the total amount originally borrowed and any capitalized interest. Accrued interest is interest that accumulates on the unpaid principal balance of a loan.

Interest Only or Principal payments

Making interest only or principal payments on a student loan is a repayment option commonly found while a student maintains school registration status. When borrowers elect to make “interest-only” payments, they make a payment large enough to cover the interest that accrues while leaving the principal loan amount unpaid. Making principal payments means that both interest and a portion of the loan principal outstanding is covered by each payment.

Interest Rate

A percentage (rate) of the original amount of a loan, including any accumulated interest, charged to the borrower for the use of borrowed money.

Interest charged on a loan varies from loan to loan and lender by lender. The interest rate is usually computed on a monthly basis, and may compound over time (that is, the interest charged during month one will itself have interest charged on it during month two, and so on).

See also Fixed Interest Rate and Variable Interest Rate.

Interest Rate Structure

“Variable” rate loans have interest rates that will vary with prevailing rates over time. Private student loans generally have a variable rate. “Fixed” rate loans have a set interest rate that won’t vary over time. Federal student loans usually offer a fixed rate.

The interest rate determined on a private student loan considers the credit rating and borrower history of the student-borrower and the co-signer. A borrower with strong credit history is more likely to qualify for a lower interest rate on a private loan. A borrower with poor credit history will more likely have a higher interest rate, reflective of increased risk.

J

JavaScript

A scripting language that is used for web pages, usually to add features that make the web page more interactive. For example, JavaScript is often used to implement incremental search and drag-and-drop functionality.

K

K-12 Education Loans

L

Lender

A bank, private company, credit union or other entity from which someone borrows money. For any new federal loan, your only lender is Direct Loans. Private student loans can be originated from a variety of different lenders and financial institutions.

Lender Name

The name of the lender providing the loan. For private loans, there is always a lender who provides the service to the borrower.

LIBOR

Stands for London Interbank Offered Rate. LIBOR is a daily reference rate based on the interest rates that banks offer to lend funds to other banks in the London wholesale money market. Many lenders base their interest rates on the LIBOR.

Here is an example of LIBOR rates, regularly updated

Loan

An advance of funds from a lender to a borrower with an agreement that the borrower pays interest on the amount borrowed and pays back the initial amount of the loan over an agreed period of time.

Loan Holder

The organization that currently “owns” the loan and to which the borrower owes repayment. Many banks sell their loans, so the initial lender and the current holder could be different.

Loan Needed

This date should reflect the month and year in which the first tuition bill (or other expense) will need to be paid. This will determine the timing of the disbursement of the loan, either directly to the school or to the borrower. The date the loan is actually awarded can also mean the start of the accrual of interest, so be sure you are not choosing a date too early, or the interest will start adding to the total cost of the loan sooner than you actually need it.

Loan Principal

The total sum of money borrowed. Loan principal includes the original amount borrowed plus any interest that has been capitalized.

Loan Re-amortization

When lenders offer borrower rewards, there are two ways they can implement them. The most common way is by keeping the monthly payment fixed. By doing this, more of each payment goes to pay down the principal on a monthly basis, so you wind up paying the loan off more quickly. For example, a loan that normally had a monthly payment of $100/month, and a term of 10 years (120 months), might have the same monthly payment but be paid off in 113 months with Borrower Rewards.

Conversely, other lenders will change the monthly payment each time a new borrower benefit kicks in, but will keep the term of the loan the same. So, in the example above, the loan might go from $100/month for 120 months, to $98/month after the first borrower benefit, and then $95/month, and so on. In this case, the lender is said to re-amortize the loan.

Loan Type

Loans for education come from two primary sources. First there are Federal Student loans including subsidized and unsubsidized Stafford loans, Perkins loans, the Parent PLUS loan and the Graduate student Plus loan. Second, there are private student loans from a range of lenders to help pay for remaining college expenses. It is recommended that students apply for federal loans first, and use private loans to cover any balance not paid by scholarships and financial aid.

There are also loan options that do not fall under the traditional student loan category. For example, money can be borrowed from home equity to help pay for college, but it is not considered a student loan.

Loan Types

Federal Stafford Loan

A fixed-rate loan backed by the U.S. Government. Subsidized or unsubsidized Stafford Loans should be used before private loans. To qualify, regardless of need, you must fill out the FAFSA (Free Application for Federal Student Aid). A financial aid award letter from your school will show specific award amounts.

Private Loan

A loan from a bank or other private entity. A loan expressly for paying for college expenses such as tuition, room and board, and other associated costs. Private student loans are based on credit and usually a credit-worthy co-signer.

Federal Grad PLUS Loan

A fixed-rate federal loan for graduate students. Graduate PLUS loans can be used to cover the full cost of attendance, less other aid. They perform a check only for adverse credit history – not for credit score.

Federal PLUS Loan

A fixed-rate federal loan for parents of undergraduates. PLUS Loans can be used to cover the full cost of attendance, less other aid. They perform a check only for adverse credit history – not for credit score.

M

Master Promissory Note

See Promissory Note.

Maximum Deferment Period

The maximum amount of time a borrower can keep a loan in deferment before full repayment can begin. Most loans are allowed to be deferred while the student is enrolled in school at least half-time and extends six months after the student leaves their program or graduates. During this time, interest may accrue.

Maximum Loan Amount

The greatest loan amount that can be borrowed using a particular loan product.

Private student loans typically carry a maximum loan amount that reflects program costs. Therefore a private student loan for medical school will carry a higher limit than most undergraduate private loans.

Be advised that the requested private student loan amount can be reduced by your school’s financial aid office to fit within the the standard cost of attendance.

You may apply and be approved for a maximum loan amount only to have it reduced by the school. Also, federal student loans carry maximum loan amounts reflective of grade level and student dependency status.

To confirm your maximum funding eligibility check with your private student lender, or your schools financial aid office.

Minimum Loan Amount

The smallest allowable loan that can be approved when applying for a particular loan product.

Lenders establish a minimum to prevent the inefficient processing of applications for very small amounts. If you are attempting to apply for a loan for an amount below the minimum requirement, you should probably ask to borrow money from friends or family instead. Consult with your lender for specific details about minimum loan amount.

Minimum Monthly Payment

The lowest allowable payment amount that can be accepted during loan repayment to keep the balance in good standing and out of delinquency or default. Lenders maintain a minimum required payment to keep borrowers steadily on track during loan repayment.

Monthly Payment

The expected monthly payment due towards outstanding debt. The monthly payment typically pays towards interest and principal, eliminating the outstanding debt over time.

N

Non-Degree Granting Program

A type of educational program not structured toward its students obtaining a degree, such as a Bachelor’s degree or Master’s degree. These might include continuing education programs, certificate programs, or adult education programs. Non-degree granting programs are not typically eligible for federal financial aid, and may not be eligible for certain private student loans.

NSLDS (National Student Loan Data System)

The National Student Loan Data System (NSLDS) is the U.S. Department of Education’s central database for student financial aid. NSLDS receives data from schools, guaranty agencies, the Direct Loan program, the Pell Grant program, and other Department of Education programs. You can look up your current federal student loans using the NSLDS at http://www.nslds.ed.gov/nslds_SA/.

Number of Disbursements

Student loans are paid out in a variety of different ways. In many cases, a loan is taken out for a full year’s need, but the school requires the money on a semester by semester basis. In these cases, the loan is usually paid twice; half of the loan amount once at the start of the fall semester, and the remainder once at the start of the spring semester. In this way, the borrower is only charged interest on the money that is actually disbursed. Other loans will only make one disbursement. In this case, interest is charged on the entire disbursed amount immediately. The number of disbursements can depend on the loan type as well as the school.

Number of Payments

This is an estimate of the number of payments required to pay off a loan using a particular payment amount. The expected number of payments might change when Borrower Rewards like loan principal reductions are factored in. By using a loan calculator you can quickly determine the number of set payments required to pay off a student loan

O

Online Application

An electronic application available through a lender’s website available on the internet. Online applications are preferable to paper applications for their ease of use and processing speed.

Operating System

The software program on a computer that manages all of the other programs on a computer. Some common examples are Microsoft Windows or Mac OS.

Origination Fee

A fee charged by a lender for processing a new loan application, used as compensation for putting the loan in place. Origination fees are quoted as a percentage of the total loan and are generally between 0.5% and 3%. Origination fees are usually charged upon disbursement of loan funds to the school or borrower.

See also Fees, Default Fee and Repayment Fee.

P

Parent-Sponsored Loan

A type of private loan available to parents and family or close friends of graduate and professional students, international students, and continuing education students, in addition to undergraduate students. Terms and conditions vary by lender.

Part-Time

Half-time registration status (or part-time) is generally considered 6 credit hours per term. Because enrollment requirements for half-time status can vary, you must confirm the answer with your schools financial aid office. Half-time status is generally the minimum registration required for federal and private student loan applications and also for eligibility for loan deferment.

See Half-Time.

Pell Grant

A federal financial aid program where money is given to students with the highest amount of financial need. A student must complete the Free Application for Federal Student Aid to be eligible. Pell Grants do not have to be repaid.

Perkins Loans

Loans awarded to undergraduate and graduate students with exceptional financial need. This is a campus-based loan program, with the school acting as the lender using a limited amount of funds provided by the federal government. The Perkins Loan is a subsidized loan, with the interest paid by the federal government during the in-school period and the nine month grace period. There are no origination or guarantee fees, and the interest rate is 5%. There is a 10-year repayment period.

PLUS Loans (Parent Loan for Undergraduate Students)

Parent Plus loans are federally backed loans that parents can take out on behalf of their undergraduate children to pay for educational costs. PLUS Loans can be used to cover the full cost of attendance, less other aid. A credit check is required, but only for adverse credit history – not for credit score.

Prepayment

Additional payments made on a student loan beyond what is required in a standard monthly payment. Making prepayments can be an effective way to eliminate debt more quickly and save on unnecessary interest costs. Before making prepayments, confirm that they are acceptable as part of your loan repayment plan. There is never a penalty for prepaying principal or interest on federal student loans, but there may be restrictions on other types of loans. Confirm with your lender the policy on prepayments before submitting any.

Prepayment Penalty

A fee charged by a lender if the borrower pays off all or part of a loan before the loan is due or before a date defined by the lender. There is never a penalty for prepaying principal or interest on federal student loans, but there may be on other types of loans. Check with your lender for more information.

Prime Rate

The prime interest rate, or prime lending rate, is largely determined by the federal funds rate, which is the overnight rate which banks lend to one another. Variable-rate loan programs base their interest rates on an index like the prime rate. Here is an example of the Federal Funds rate as updated daily

See also LIBOR.

Principal Amount

The total amount of money borrowed. Additionally, any interest that has been capitalized is added to the principal amount. Principal amount can also be increase by additional loan origination fees. Generally, once the principal loan amount is repaid, full loan repayment is satisfied

Private Certified Loans

A private loan that requires a school official to confirm the student’s eligibility before disbursement.

Certification is normally completed by the financial aid staff and will include information like the cost of attendance and the registration status of the student.

Certification ensures that the student is not over-awarded in total funding beyond the cost of attendance. After being disbursed to the school the funding is applied to the student’s account. After the tuition balance is paid any remaining loan funding is returned to the student as a refund. Ask the financial aid office at your school how the refund process is handled.

See Certified Private Loan.

Private Loans

See Private Student Loans.

Private or Boarding School Loans

See K-12 Education Loans.

Private Student Loan Consolidation

A private student loan consolidation allows for a borrower to combine several individual loans into one single loan.

Making payments to a single lender simplifies the repayment process and makes debt elimination more predictable. Private student loans can be consolidated with other private student loans, and remain separate from federal student loan consolidations.

When reviewing private student loan consolidations consider the borrower benefits offered and the flexibility of the repayment term. See also Consolidation Loan and Federal Student Loan Consolidation. Compare Private Student Consolidation Loan options.

Private Student Loans

A non-governmental loan made by a private lender expressly for paying for college expenses such as tuition, room and board, and other associated costs. Private student loans are based on credit score and usually a credit-worthy co-signer. Sometimes private loans are called “alternative loans”. Most private loans have a range of possible interest rate and fee combinations. The pricing combination a borrower gets, if they are approved for the loan, will be determined by the credit profiles of the borrower and co-signer.

Private Uncertified Loans

See Uncertified Private Loan.

Program of Study

Prospective student’s field of study or type of academic program.

Promissory Note

A binding legal contract between a lender and a borrower that contains the loan terms and conditions, including how and when the loan must be repaid. By signing this note, the borrower agrees to the terms of the loan. This document must be signed by the borrower and any applicable co-signer before the funds are distributed. The borrower should keep a copy of the promissory note for personal record until the loan has been repaid.

Q

R

Rate Charged During Repayment

Some loans carry different interest rates in the period in which a student is enrolled in school from the repayment period. This is the interest rate applicable during the repayment period.

Rate Index

Usually a commonly published rate, such as the prime rate, LIBOR, or Treasury Rate. Student loan interest rates are often expressed as a rate index plus an additional interest rate spread or margin. Note that there are variations on these common rate indices. Read loan details and the promissory note carefully to identify the Rate Index (if any) that is used to calculate interest on your loan.

See also Interest Rate, Prime Rate and FLIBOR.

Repayment

The period of time in which a borrower takes on the responsibility of repaying a loan.

Repayment Fee

A fee that is calculated and added to principal just as repayment begins. See also Origination Fee, Default Fee and Fees.

Repayment Length – Standard and Extended

For federal student loan consolidation loans, borrowers often have a choice of repayment structures that can include:

Standard: Assumes a repayment period of 10 years (120 months) of level payments.

Extended: Assumes the maximum allowed repayment length for which you would be eligible, which varies from 10 to 30 years, depending on the amount of the loan.

Repayment Rate

A different rate of interest on a loan once that loan has entered repayment (usually higher than the rate charged during the deferment period). See also Deferment Rate.

Repayment Schedule

An organized statement from the lender listing the amount borrowed, the monthly payments and due dates and a conclusion for debt repayment.

Residency Loans

Private student loans expressly for the purpose of paying for educational expenses incurred during medical residency programs. Borrowers can often borrow to cover living expenses for the time relevant to the residency program, but check with your selected lender to understand any limitations.

S

Scholarship

These are monetary awards that do not have to be repaid; they are generally awarded based on any number of criteria, including financial need, academic or athletic achievement, or public service. Scholarships often require an application that may include an essay, recommendations, or an interview process.

Servicer

For student loans, a servicer is an organization specializing in billing and customer service during repayment. The servicer is often the most common point of contact for the borrower, and may be a different entity than the lender.

Stafford Loans

Fixed-rate, federally-backed loans available to undergraduate and graduate students. Stafford Loans should be used before private student loans. To qualify, regardless of need, you must fill out the FAFSA (Free Application for Federal Student Aid).

Schools offer Stafford Loans directly from the U.S. Government, in which case it is called a Direct Stafford Loan. Many schools participated in the FFELP program until the passage of The Health Care and Education Reconciliation Act of 2010 (HCERA, P.L. 111-152, 3/30/2010) thereby eliminating FFELP.

Stafford Loans may be subsidized (the government pays the interest while you are in school) or unsubsidized (you are responsible for interest while in school, though you can defer payments until after graduation). The subsidized Stafford Loan is available if you can demonstrate financial need, but almost all students, regardless of need, are eligible for the Unsubsidized Stafford Loan.

Check your financial aid award letter or with your school’s financial aid office for further information on the Stafford Loan program, or log into www.studentloans.gov for more information.

Student Loans

Loans offered to students to assist in payment of the costs of their education. See also Private Student Loans, federal Student Loans, and Stafford Loans.

Student Status

A classification of a student for the purposes of the federal financial aid application – either independent or dependent. Most traditional college students are dependent, even if they are paying their own way through college or no longer have a relationship with their parents. Stafford Loan limits can vary by a student’s status of independent or dependent. See also Dependent Student and Independent Student.

Subsidized Stafford Loan

A fixed-rate, federally-backed loan available to undergraduate and graduate students where no interest accrues while the student is enrolled.

T

Total Balance of Combined Loans

For consolidation loans, the sum of all of the outstanding loans that you want to consolidate.

Total Combined Monthly Payment

For consolidation loans, the sum of all of the monthly payments for each of the outstanding loans that you are attempting to consolidate. This would be the combined monthly payment if you DON’T consolidate.

Total Cost of Loan

An estimate of the sum of the total payments you would be scheduled to make on a loan. Total cost of loan might change when borrower rewards (or borrower benefits) are factored in. Note that borrower rewards can sometimes be lost – be sure to check with your lender for details.

U

Uncertified Private Loan

A private student loan that does not require a school official to certify any aspect of the amount borrowed. Uncertified private loans are usually disbursed directly to the borrower. Compare Private Loan options.

Unsubsidized Stafford Loan

A fixed-rate, federally-backed loan available to undergraduate and graduate students where interest accrues while the student is enrolled.

V

Valid for Past Due Balances

A feature of a loan where the loan may be used to finance payments already owed to the school, such as overdue tuition bills. Contact your lender for any restrictions.

Variable Interest Rate

An interest rate on a loan that is subject to variations over time. The rate on a variable loan will increase or decrease to reflect the rates available on indexes like LIBOR or Prime. Confirm with your lender the structure of your variable rate loan when you apply. Here are regularly updated examples of LIBOR rates, and Prime as dictated by the Federal Funds rate.

See also Interest Rate and Fixed Interest Rate.

W

William D. Ford Direct Lending Program

See Direct Loans.

Work-Study

A federally-funded program in which the federal government and the college provide funds for part-time employment on campus as a component of a student’s financial aid. Students earn at least the federal hourly minimum wage and the amount of the award can depend on when the student applies for the job, the level of financial need, and the availability of funds from the school. Graduate students might receive a salary instead of an hourly wage. Work-study jobs can be either on campus or off campus and may be related to the student’s course of study. The amount a student can be paid, or number of hours worked, cannot exceed the Federal Work-Study award.

Y

Your Credit Rating

Please describe the general credit profile of you or your co-signer to help us better present loan options.

Z

Zip Code

Your ZIP code helps us show you any state-specific loans from our database that might be available to residents from your state.