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Friday 4.25.2014

National Application Center :: glossary

Plan, explore, and apply to college using these great tools.

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.

Bridge Loans: Bridge loans are loans that provide short-term financing for tuition payments, books etc, while the student is waiting to receive their college financial aid. To obtain a bridge loan, contact the financial aid office at your college.

Capitalization: The addition of unpaid accrued interest applied to the principal balance of a loan that increases the total debt outstanding.

Consolidation: Combining several education loans into a new loan with a new payment schedule and interest rate.

Default: The failure to repay a loan in accordance with the terms of the promissory note. Default occurs after 270 days of non payment on an account.

Deferment: An approved temporary suspension of loan payments based on certain events and criteria.

Delinquency: The failure to make scheduled monthly loan payments when they are due.

Direct Loan Program: Under the Direct Loan Program, the funds for the loan are lent to the student directly by the U.S. government, not a bank. The rates are the same as the FFELP. The only difference is that about 33% of the colleges and universities use the Direct Loan Program as opposed to the FFELP.

Disbursement: A transaction that occurs when a lender releases loan funds.

Expected Family Contribution (EFC): The dollar amount that a family is expected to pay toward a student's educational costs. This federal calculation is based on family earnings, assets, students in college and size of family.

FDSLP: The Federal Direct Student Loan Program.

Financial Need: The difference between the student's educational costs and the expected family contribution.

FFELP: The Federal Family Education Loan Program was formerly known as the GSL-Guaranteed Student Loan Programs. This program offers the Stafford loan for undergraduate and graduate students, the need-based Perkins Loan, and the PLUS loan for parents of undergraduates. The Federal Stafford Loan is the largest and most commonly used student loan program. It has both a subsidized and unsubsidized option depending on the student's eligibility. Students may qualify for the subsidized Stafford Loan if they show financial need. The federal government pays the interest on this loan while the student is in school. Students without financial need may borrow under the unsubsidized Stafford Loan program and are fully responsible for all interest charges.

Forbearance: The approved temporary suspension of loan payments due to a financial hardship during which interest continues to accrue.

Free Application for Federal Student Aid (FAFSA): The federal application form students must first complete in order to apply for virtually all forms of financial aid assistance.

Grace Period: The period after a student either graduates or leaves school and before loan payments must begin.

Grants: Financial aid that does not have to be paid back is awarded to students based on financial need.

Guarantor: The agency or institution that repays lenders in the event of a default in the FFELP.

Interest: The dollar amount charged to borrow money.

Lender: The institution that provides the money to be borrowed through the student loan program.

Promissory Note: The legal and binding contract signed between the lender and the borrower which states that the borrower will repay the loan as agreed upon in the terms of the contract.

PLUS Loans: Parent Loans for Undergraduate Students. If your parents want to borrow funds to help pay for your education, they may borrow up to the difference between your educational costs and other financial aid each year from a bank or other lending institution through this program.

Scholarships: Awards that do not usually have to be paid back. 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: An organization that acts on behalf of the lender to administer their student loan portfolio and is paid a fee to do so.

State Grant Program: State funding coordinated by the state agency that provides grants to needy state residents who meet the eligibility criteria and are pursuing postsecondary education.

Statement of Educational Purpose/Certification Statement on Refunds and Default: The borrower must sign this statement to receive federal student aid. By signing it, they are stating that they do not owe a refund on a federal grant, that they are not in default on a federal loan, and that the amount they have borrowed under those loan programs doesn't exceed the allowable limits. They are also agreeing to use the student aid only for education-related expenses. Part 1 of the 1995-96 Student Aid Report (SAR) contains such a statement. You must sign either that one or a similar one prepared by your school.

Student Aid Report (SAR): The form students receive after filing a FAFSA application that notifies them of their eligibility for federal student aid.

Subsidized Loans: Loans on which the federal government pays the interest until the student enters repayment, as well as when the loan has been granted a deferment; during the deferment period the government pays the interest.

Undergraduate: A student who has not yet received a bachelor's degree.

Unsubsidized Loans: Loans on which the student is responsible for paying from the date of disbursement until the loan is paid in full, regardless of enrollment status.

Work-Study Payments: Federal program where payments are earned by students who work on campus or off campus to help pay for school costs.

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